Ep386: Andrew Woodward – Do Not Invest in a Product before You Understand It

Andrew Stotz 00:01
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning in our community. We know that to win in investing, you must take risk but to win big, you've got to reduce it. And if you're not already a member of our community, please go to my worst investment ever.com right now to join and receive the following five free benefits. You'll get the risk reduction checklist, my weekly investment research email to help you increase returns a 25% discount on all a starts Academy courses instant access to our Facebook community to get to know guests and fellow listeners. And finally my curated list of the Top 10 podcast episodes fellow risk takers. This is your worst podcast host Andrew Stotz from a Stotz Academy, and I'm here with featured guest, Andrew Woodward, Andrew, are you ready to rock?

Andrew Woodward 00:57
I'm ready to go.

Andrew Stotz 00:58
Let's do it. So I'm gonna introduce you to the audience. Andrew Woodward is the founder of the investors way. He's a former chartered accountant, chartered secretary and company director, who now teaches people to take control of their money and learn how to invest it without the need for expensive advisors so that they can build a secure financial future. He's on a mission to change the financial lives of a million people, and believes everyone deserves to know how to manage their money for better money, outcomes. Andrew, take a minute in Philly, for the tidbits about your life.

Andrew Woodward 01:42
Well, thanks for having me on the show, Andrew, and thanks for that introduction. And you look a million people is an ambitious goal. But I feel that if I can influence even half a million people and give them information to change their financial outcomes, I know they can share that information with other people in their family. And so we get to use the power of compounding in education, not just with our money. So hopefully, the more people I can impact with better money management and investing education, the more people they can share it with. And over time, we can have an impact on more than a million people.

Andrew Stotz 02:20
Fantastic. And tell us a little bit about how you're doing that through website through, you know, your courses or other activities, let us know, like what you're doing in that space. Also, you know, where people could go to if they want to learn more, and I'll have links obviously, in the show notes, too. Sure.

Andrew Woodward 02:36
So obviously, the the web page is the investors way.com.au. Everything's within that page, you can go to the product page and have a look at the various products that we have. That are our core programs called investing bootcamp. And through that program, we teach the basics of investing in property stocks and cash based investments or what I call cash based investments, which is predominately precious metals and in turn deposits and government bonds and things like that, the less risky stuff. And you know, we've got some entry level products that just get people started. So we've got a 21 day Money Mastery program, which is just an E book that really starts the demystification process so that people start to understand the jargon because I've found over my journey that financial advisors, the banks, and product creators have complicated the language, so that we feel as though we need them to explain it all to us, or at least just rely on their knowledge so that we we invest with them with their products. So that entry level products about demystifying the jargon and getting people started, and then we build up into money management, and eventually investing Bootcamp, brings it all together teaches you how to invest, and takes you down that path from where you are today to where you want to be. wherever that is, you know, for a lot of people financial freedom means a lot of different things. So I don't try to put too firm a definition on it. I'd much prefer people do that themselves. But ultimately, it's about getting your investments to fund your lifestyle, in whatever way you can. And so we teach people how to do that themselves. And it's all about empowering them to, to have the confidence and the knowledge to invest for themselves.

Andrew Stotz 04:29
And I'm looking at the website for the listeners out there, just go to the investors way.com.au. And I see the investing bootcamp here and seven or so it's six modules, each with multiple lessons. Looks pretty interesting. And so we'll have that in the show notes. So

Andrew Woodward 04:47
we're about to do a major relaunch of that product. So that currently is version two. We're about to release version three, which brings a whole host of additional material into the program. So over the top I've done a lot of masterclass trainings and expert interviews with people from various parts of the industry. So I'm bringing all of that material into version three of investing bootcamp to make it a lot easier for people to implement. So one of the things I've learned through people who've done the course is that they get a lot out of it, and they start making their first investments. And I love getting those emails from people saying, I bought my first property or I bought a stock or, you know, I've, I've bought my second and third properties now that they really inspire to keep going. But one of the things I found for those people who are a little bit more hesitant was that they just needed a bit more hand holding and a bit more instructional information. So I'm bringing that information that I used to hold in a membership per site, I'm now bringing that into investing boot camp just to make it a more complete picture to help those people that in the past may have done the course and not got as much out of it as I would have liked, they got to get it from this additional material. So that's coming out in a couple of weeks as well. So for the people who are interested, keep your eye out because a major launch of version three of investing bootcamp is coming.

Andrew Stotz 06:10
Exciting. Well, we'll have that on the show notes. So ladies and gentlemen, if you're interested, just go to the show notes, click on the link and go to the page. Well, now it's time to share your worst investment ever. And since no one ever goes into their worst investment thinking it will be. Tell us a bit about the circumstance leading up to it, then tell us your story.

Andrew Woodward 06:30
Yeah, absolutely. So it's an unusual thing, like you said to be talking about your worst investment. But mind just take a little bit of time or background to explain why it became my worst one. But when I first started getting absorbed with financial information, and in getting, you know, into this, this market, I did wait like most people do, I went to those overhyped investment workshops or conferences or whatever, they were called, at the time spent two or three days in a room with people all getting completely, you know, amped up to the nth degree. By the time they walked out of that I thought they were the best investors in the world. And I was one of them. And I learned this strategy that was called the magic Moo cow. And it was what I thought was going to be the absolute best investment strategy that you could ever possibly ever run into Moo cow.

Andrew Stotz 07:30
Is it mo?

Andrew Woodward 07:32
Yeah, that's it. That's it. Moo, moo. Yep. And the way it basically worked, I know it's a complex one, was it for advanced people, but I thought as advanced after three days, basically, you would buy a stock, you'd wait a little bit for it to go up. And then you'd introduce options into the equation, and you would buy a port above the price that you entered the stock. And then every month, you just write calls, so you'd sell calls, and collect the premium, which would, after a few months would fund the port, and the stock would do whatever it did. And no matter what happened, you were always going to be making money. And you'll be making, you know, one or 2% a month from the calls and you pay five or 6% for the court. So after the year, you've made 18%, maybe off the rules net of the port. And if the stock went up, you made a profit if the stock went down, you're covered by the port at all just look fantastic. And so I did it. Yeah, I'm the type of guy that when I learned something, I go all in and do these things. And I did it for a few months on my own, or actually a lot more than a few months on my own. And it was doing okay, there was other months where you weren't getting the percentages that you know, you're the teacher of this strategy was suggesting you're going to get, but all in all, it was still doing pretty good. And then things this is where it turns to the worst side of things. So I got an email from the promoter of this or the presenter of this course. And I owned the magic Moo cow strategy, saying that for a few select people, he wanted to offer them a product that would do all the hard work for me. And so I thought, Well, that sounds like pretty something I want to do introduce some leverage into this equation. Have someone else look after it for me even though it wasn't necessarily a big time consumer, I just got caught up in the idea of leverage, much more money, much more profit. This was going to be the best thing since sliced bread. So I enter into an arrangement which enabled me to leverage my investment in the magic Moo cow strategy into like $100,000 which It's time for me, I think I only had to put down like $5,000. And I was leveraged to 100,000 like crazy numbers. Wow. And unbeknownst to me the because like, like, I think I said up front. And we'll probably come back to this point at the end as we wrap this up, but you don't read all the small small print, when you're offered a product like this by a guy that you've built some trust with having some success with, you kind of rely on a little bit, you know, whether you should or you shouldn't, that's another another podcast episode. But I relied on the advice I was getting, and, and made that investment. And as you can imagine, things went a little bit pear shaped. And the stock market had a feeling major correction, not a few months after we started getting into it. So for the first few months, everything was fine. No, no, no dramas at all. It was doing what it was supposed to do. And in fact, it continued to do what it was supposed to the only problem was that, you know, it was a major bank that was providing this product or supporting this product. And when the market had a major meltdown, the product was designed to move the cash sorry to move back into cash. So because the stock had dropped so much, they sold a lot of the stock and put it back into cash. And then the mechanism that they designed to then get back in when the market was ready, was so restrictive, that the ability to make your money back, irrespective of what the market did became almost impossible. And so very quickly, I started seeing that the value of what I put in and the value that I'd leveraged to it dropped dramatically, and we're sitting on a lot of cash. And then there was no stock to write calls against, there was no stock to buy puts for. So we're pretty much just sitting in cash while the stock market was growing. And going back to where it was supposed to be. So once the negativity from the customers grew to a crescendo, the promoter of the product, approached the major bank and negotiated a way for the product rules to be changed to enable people to at least be able to get something back on their investment. And after a few years of negotiating and watching this investment pretty much slowly die. You know, my, I guess my $5,000 investment became something like I think it was $500. And then I got back or something like that. But at the whole time I was paying interest as well. So on a much larger sum of money. It became a very, very tough lesson to learn. And one that, you know, circling back to where I said I'd circle back to was a bit of a catalyst in time, for me creating the investors way. Because I learned the lesson I learned was that you just cannot rely on other people when it comes to investing your money. Now, that is a very generalistic statement. And I know what offends a lot of financial advisors and bankers and whatever. But I always say to my people that nobody is going to care more about your money than you. And if you care enough about your money to want to secure your financial future, you ought to know how to do it. And that's why I teach people how to do it now. And the magic Moo cow, unfortunately, is not one of the strategies that I teach. Because whilst it can work, what I did discover is that there are a number of scenarios where it doesn't. And for people who are looking to secure their financial future, it's not on the radar for investment, with a risk profile that I would teach to people who are trying to learn to secure their second financial future, there's just too much risk involved. And look, I also teach people that the more risk you take, the more return that you can potentially earn. But there is a limit. Yeah, and given that the majority of the people I'm dealing with, I tried to learn. And I know a lot of the time the first time investors, the magic Moo cow just doesn't hit the radar as something that they should be learning early on like I did. So. It as I said it very rapidly became, you know, the worst investment I ever made, but probably the best lesson I ever got.

Andrew Stotz 14:53
Yes. And sharing with others really amplifies that lesson. So maybe you could just go through and listen doubt, you know, as you look back at that time, with so much clarity, what are the lessons that you learn from this?

Andrew Woodward 15:07
Well, the very first one, which is such an obvious thing, in hindsight, which would have been to understand the product, and this is something that, you know, I learned after the fact when I buried myself in Warren Buffett, and everything he's ever had written about him, or he's written himself I've written. And, you know, the one thing that he said so regularly through that time, the early 2000s, was that he doesn't invest in anything he doesn't understand. And people were, people were harassing him about why he wasn't getting involved in the.com. Era. And he just kept telling people, I just don't understand how these companies are going to ever gonna make any money. And then sure enough, you know, we had the.com bust. And he looked like a genius. And he is a genius in my moment. I'm a very big fanboy of Warren Buffett, and a lot of what I teach is based on a lot of his principles, because, yeah, he's got the track record. And so first thing was to understand what you're investing in. And despite me thinking, I understood this, this strategy, which I think I still do, and did, what I didn't understand was the rules that had been introduced by a major bank to protect them and provide some level of security for, I guess, the lowest common denominator, which didn't fit the way that the strategy was supposed to work. But that was the first one. And probably the best one. The other one is to not to introduce leverage, right? To an investment that you don't understand or is highly risky. I got caught up, you know, I got excited by what I was seeing happen in my smaller investments, that could be achieved. So I thought, right, multiply that and I'll get there a lot quicker. And leverage is a great thing when it's working for you. It's not such a great thing when it's working against you. And so that was the second thing. And I think they really are the two key lessons Got it? Got him. But they don't, they're pretty critical ones.

Andrew Stotz 17:16
Yeah, I'd say so. So maybe out summarize what I took away from your story. And let me know if you have anything to add to that. One of the things about so many of these investment strategies out there is that they can't always be implemented. So sometimes, you know, people are talking about, you know, let's just say penny stocks, you may be able to get in, but you may not be able to get out when it's time to sell. And also, I would highlight the banks, banks love issuing products, because they make money on these types of products. And sometimes the structures are, you know, very complex. And when everything starts to fall apart, the bank can do anything once. And as they've done in this case, to wind it down or execute it, you know, and, yeah, it's very hard to see all the fine print there. And that reminds me of another thing, which is the idea of, you know, before the 2008 crisis, I think it wasn't such a big thing that people would talk about, what would happen to this model, this quantitative model, this investment strategy, if the market really crashed? And nowadays, it's a much more common thing to have to answer that question. Because so many particularly quantitative structured products, derivative products, are really built in an up market. And now having been an upmarket, you know, globally, let's say, for a while, you know, almost every product has been designed in an up market and an upmarket product, does not always work in a down market, just like a down market product is outperforming in a down market probably doesn't work in that market. So there's that cycle. And then the last thing that I would say that it reminded me of is the idea of, I'd like what you said about, you know, nobody's gonna care more about your money than you do. And the other way of looking at this is it imagine that someone listening is 30 years old, and they want to retire when they're 60. They means that they need to manage their money for 30 years, you know, it's hard to find a financial advisor, there's going to be with you for 30 years and do well for you. But it's even more than that, actually, you know, you're going to possibly live to be maybe 90. So you really have 60 years to manage your money. And when you put things in that type of decades long timeframe, it's just simply impossible that anybody's going to be able to manage your money. You know, throughout your life, you have to be the primary caregiver of your money.

Andrew Woodward 19:51
Yeah. And there's two parts to that as well. And then in summary, given there is that with the financial advisors and one of the things that I say to them I think a lot of time is that they have all the knowledge. And whilst they might be managing your money, whether it like you say whether it's five years, 30 years or 60 years, if they go away, the knowledge goes with them. And so you've paid over over many years for that knowledge, but you've not benefited from it personally, like your wealth might grow. And that you might have a fantastic advisor who can grow your wealth. But as soon as you stop paying, that knowledge goes away. And so what I am trying to encourage people to do is to invest in themselves and get that knowledge. Because ultimately, this and pretty simple things you can do to manage your wealth without having to get caught up in complex structures and complex products and all that stuff like, and so the the knowledge doesn't have to be overly expensive to get to a position where you can manage your money yourself for that 60 year period for a 30 year old, or whatever the number of years might be that you have ahead of you. It doesn't have to be overly expensive.

Andrew Stotz 21:07
Yeah. And I think the products that are being marketed out there tend to be complex, they have a complex for reason, because more money is made from them and all that. But the point is, is that many beginners just see those products first. And then they see the complexity there. They either follow it, or else they get scared, like oh, my God, do investing is too complex. But really, it's not that complex.

Andrew Woodward 21:32
Yeah. And that was part of the reason why this particular investment of mine that I talked about failed was that the the promoter of the course that I went to who worked with the bank to create the product, they just got to, they tried to be too smart. They tried to predict every scenario without necessarily working through how they were going to work. And they tried to build in so much risk management and protection, that in the end, the device that they created was so restrictive when the you know, the worst event happened, that the the investment couldn't return from there. And so they, again, they overcomplicated everything. Like Like you alluded to before, the product just became so complicated that people tend to stay out of the market, because they just get overwhelmed. And so my, I see my role at the investors way to, to remove that complication and that overwhelm so that people are confident to enter the markets. And even the name the investors way I, you know, the inspiration for the name came from a book called The artists way, which is about performance, people and getting writer's block. So I read this book, off the back of advice from somebody who I was learning from about trading. And it was about journaling. And, you know, just getting into the habit of journaling. And if you're getting stuck, you can have a look at this book called The artists way, which will teach you how to overcome writer's block. And so that was the inspiration behind the name the investors way, which is overcoming that hurdle of your first investment. And, and that, I guess that overwhelmed feeling like you can't do it, and showing people how it's possible. And like I said, it doesn't have to be overly complicated.

Andrew Stotz 23:28
Yep. So I'm going to answer the next question for you. And then I'm going to ask you to answer it in a different way. So the next question is based on what you learn from this story, and what you continue to learn what one action would you recommend our listeners take to avoid suffering the same fate? And I'm going to answer it for you by saying, My goodness, ladies and gentlemen, go to the investors way.com.au. And, you know, go and learn about what's out there, there's a free download. And then there's the course. So obviously, you know, you've taken a lot into that from what you learn. But I just want you now to put yourself in the shoes of a young person that's looking for a way to invest in they have a little bit of money, and they're trying to figure out they got so many different things coming at them, you know, what advice would you give him to help them avoid suffering the same fate? Well,

Andrew Woodward 24:16
I guess my first advice is to read some books and like I said, I you know, I buried myself in Warren Buffett and I think he he's, there's a number of books that he's written, that are a great place to start. And if you're if you're not a stock person, and you don't have to be if you if you're more attracted to property than find a book about property or real estate, depending on which country you come from, as to what they call it, and learn just from your book about the basics, and then my biggest advice I ever give anybody is just start. Warren Buffett has a quote, and I know like I said early, so I'm a fanboy. So I'm going to use his name. But here's a quote that the best time to buy I don't think it's he's but it's the best time to plant a tree was 50 years ago, the next best time is today. And it's the same with investing, not sure we could have invested started 10 years ago, five years ago, or 12 months ago when the market was doing x, y, or Zed, but you didn't. So the next best time is right now do it today. So do a little bit of learning, and then just start getting your start small, and you'll learn by doing.

Andrew Stotz 25:25
Great. Last question, what's your number one goal for the next 12 months? Well, my

Andrew Woodward 25:30
number one goal for next 12 months is to get this version three launched and into the hands of as many people as possible, and really becoming out of a pandemic, a lot of people I believe, and the people that I'm talking to have had this realization that maybe their money wasn't in a state that it should have been or could have been. That would have helped them manage this process or this time a little better. So I think it's a really opportune time for people to think about where their money needs to be, and start taking some action and the bootcamp is a great way you get access to me and everything that I have produced. Let's throw everything in there so that you make sure or I make sure that I give you the best of me, and I give you the tools to enable you to to start because at the end of the day, you just have to start.

Andrew Stotz 26:28
Okay, so listeners, there you have it. Another story of loss to keep you winning. My number one goal for the next 12 months is to help you mind listening, reduce risk, and increase return in your life. To achieve this, I've created our community where you gain the five free benefits I mentioned earlier, just go to my worst investment ever.com right now, to join us. As we conclude, Andrew, I want to thank you again for coming on the show. And on behalf of a Stotz Academy I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?

Andrew Woodward 27:09
I just want to say thank you very much for having me and allowing me to express and get off my chest my worst investment ever. Not something I do often and I hope that the listeners have learned something from my mistakes so that they don't make the same ones

Andrew Stotz 27:24
maybe I should change the ending to say You are hereby officially released from your words. It's kind of like a confessional. Well, that's a wrap on another great story I was create, grow and protect our well fellow risk takers. This is your worst podcast hose Andrew Stotz saying. I'll see you on the upside.