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Get Rich Quick Gurus: Don’t be misle

Written by R. A. Stewart

”If it is too good to be true, it almost certainly is.”-anonymous

Have you ever seen those adverts on youtube from Get rich Gurus who claim to have made thousands of dollars per month and promise that you can by following their formula. Strange, that we never hear from those viewers who the videos are aimed at.

How do these people make their money?

The answer:

They have a call to action in the description of their video. Many of these call to actions are affiliate programs where the person behind the youtube channel gets a commission if you sign up with the website.

Having a degree of common sense and discernment will go a long way when you are confronted with people who are making these outrageous claims.

Here are some things to keep in mind:

1 You do not know what another person has done to get where they are nor do you know how much money they have outlayed to get where they are.

2 You do not know how hard another person has worked to get where they are. 

3 For everyone who has achieved something out of the ordinary there are thousands who tried the same thing and achieved nothing but a lighter bank account.

Re Flags to keep an eye out for.

They will use images of villas, stacks of cash and super cars to create what is known as “Fear of Missing out, FOMO”.

In the video they will make it seem so simple that anyone can do it by using the phrase “Simple step by step system.”

How do these people make their money?

Their income is made through the YouTube adsense program, from selling courses on how to make money, affiliate programs, and from promoting affiliate programs.

An aggressive call to action is a sure red flag. “Do this before its too late” is a phrase which is used to create a desire in the view to make an impulsive decision.

It pays to have a healthy level of skepticism when watching these videos. 

Turning to your own situation, ask yourself “How does this business fit in with my lifestyle?”

Ask yourself the following questions:

  1. How much time do I need to devote to this business and do I have the time to spend on this?”
  2. How much money is required to make this business idea work?
  3. “How will this affect my lifestyle?”
  4. Do I have the desire to persevere with this idea?

Don’t give up your day job!

One YouTube marketer puts this disclaimer on his videos, “Most people make nothing.”

That basically sums it all up. There is certainly nothing wrong with having a crack but being sensible about it will save you a pretty penny.

About this article

You may use this article as content for your blog or website. 

Read my other articles on www.robertastewart.com

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Mistakes made by investors

 

Written by R. A. Stewart

Everyone makes mistakes, it is a part of learning. Those who claim to have never made any mistakes are living in self-deception. As far as money and investing is concerned, learning how to invest according to your goals and personal circumstances requires experience and that will be accompanied by mistakes along the way. As they say, “Experience is your best teacher.”

Here are some of the most common mistakes made by investors.

  1. Investing too conservatively

Investing too conservatively will leave you short-changed in the long run if there are decades between you and retirement. Long-term investors who are too conservative are leaving thousands of dollars on the table. This does not mean that you should be reckless and invest your life savings in something risky but invest for growth.

  1. Investing in the wrong fund.

If you have a retirement fund or mutual funds then investing according to your goals is important. If you have a rainy day account this should be invested in something safe such as with a high street bank because the money is available as needed and the last thing you want is to invest your rainy day fund in something volatile such as shares and  just when you need the money your balance has gone down and you will have less money in your account than you thought you had.

 

  1. Not diversifying

Placing all of your eggs in one basket is just asking for trouble. You don’t know what is going to happen in the future. Investing your money in several places will cushion you from the effects of a downturn in the economy because not all industries are affected in the same way. 

  1. Unwillingness to get financially educated

Ignorance can be very costly. If you are not even willing to learn how to manage your own money and investing then you have only yourself to blame if you end up in need. There is only one person who can change your situation and that is the person you see in the mirror.

  1. Lack of Planning

Not knowing where you are going will lead you to nowhere. Having goals for you and your finances gives your work and your life a purpose. It gives meaning to everything you do. It is the “Why” to everything you do.

Everyone has choices but these choices have consequences and it is up to you to make choices which are beneficial to you and your family if you have one. Taking responsibility for your choices and mistakes shows that you are a mature person. Immature people blame others for their mistakes and are quick to find a scapegoat for their misfortune.

About this article

This article is of the opinion and experience of the writer and is not financial advice.

You may use this article as content for your blog or ebook.

Read my other articles on www.robertastewart.com

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Investment Strategy

Investment Strategy

Written by R. A. Stewart

Because investing is not a sure thing in most cases, it is much like a game – you don’t know the outcome until the game has been played and a winner has been declared. Anytime you play almost any type of game, you have a strategy. Investing isn’t any different – you need an investment strategy which is based on factors such as your age, your goals, and your personal circumstances.

An investment strategy is basically a plan for investing your money in various types of investments that will help you meet your financial goals in a specific amount of time. Each type of investment contains individual investments that you must choose from. A clothing store sells clothes – but those clothes consist of shirts, pants, dresses, skirts, undergarments, etc. The stock market is a type of investment, but it contains different types of stocks, which all contain different companies that you can invest in. 

Your financial plan must be one which fits in with your personal circumstances and not something which you feel you should do just because others are doing it. Making choices which will enable you to live within your means is at the heart of money management, it is not the size of your pay packet which counts it is what you do with it which determines how much you have by the following pay day.

If you haven’t done your research, it can quickly become very confusing – simply because there are so many different types of investments and individual investments to choose from. This is where your strategy, combined with your risk tolerance and investment style all come into play. There are plenty of books available on finance and investing. Reading these books will increase your financial literacy with the result that you make better choices in the future.

If you are new to investments, work closely with a financial planner before making any investments. They will help you develop an investment strategy that will not only fall within the bounds of your risk tolerance and your investment style, but will also help you achieve your financial goals. 

Never invest money without having a goal and a strategy for reaching that goal! This is essential. Nobody hands their money over to anyone without knowing what that money is being used for and when they will get it back! If you don’t have a goal, a plan, or a strategy, that is essentially what you are doing! Always start with a goal and a strategy for reaching that goal!

Your goals are the factors which determine where you should invest your money. If the money is for your retirement then growth funds may be the answer to where to invest but this all depends on how long to go before you retire and when you are likely to need that money.

Never beat yourself up for making the odd mistake and never let it deter you from making future investments. Learn from your mistakes and learn from them. In this way you will become a better investor.

ABOUT THIS ARTICLE

This article is for information purposes only and is not financial advice, it is of the opinion of the writer and may not be applicable to your personal circumstances, therefore discretion is advised. 

Read my other articles on www.robertastewart.com

Working in your chosen field

You may not have the talent or inclination to be an international sportsperson but you can be an asset in your chosen field and that does not mean that you have to be something out of the ordinary to become a valued member of society. A person who works at an entry level job can do so with such a good attitude that their diligence will not go unnoticed by their employers.

You may not particularly like your job and have any control over what happens at work but your attitude is something you can control. An employer with a bad attitude will take that bad attitude with them wherever they go. 

If you enjoyed this article then this ebook may interest you:

How to Enjoy Your Job

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Investing: Experience is the best teacher

Investing: Experience is the best teacher

Written by R. A. Stewart

“He who never made a mistake never made anything”-Jim Addison, Scottish evangelist

In investing as in anything else in life there is no substitute for experience. It is all very well learning about how to become a good investor but it is only when you start investing your own money in the markets when you learn how to become a good investor.

Some investors play the markets on paper and are excited that their paper portfolio is showing a profit on paper so start investing real money and soon find that the markets don’t just rise but fall as well.

It soon dawns on them that what goes up also goes down. 

It is important to get used to the volatility in the markets and ride out the lows. If you are clear on why you are investing then the highs and lows are not a problem.

There are two ways to learn:

  1. Your own mistakes
  2. The mistakes of others

You can reduce your own mistakes by getting yourself financially literate. This comes from reading books on investing and finance and from learning from the mistakes of others.

There is nothing quite like making your own decisions as to where you are going to invest your money. The satisfaction to be had when your judgment is spot on, but you will make mistakes along the way as we all do.

Don’t beat yourself up if some company you had shares in fell by the wayside. Learn from your mistakes and move on. It is important to not let the market volatility deter you from investing.

If you are new to the world of investing then think of it this way. If you are learning to drive a motor vehicle, learning how to use a computer, or learning the ropes in a new job, you will make mistakes but as you gain more experience your level of competence will grow and your mistakes will be less and less.

Learn all you can about the ins and outs of the market and apply it to your own personal circumstances. The older investors have been through a number of roller coaster rides with the share market over the years and are worth listening to for their opinion, but it pays to have the discernment to know who is worth listening to and who not to take advice from.

A few people were scared from the 1987 share market crash, called “Black Monday” that they never invested in the share market since. Such people have missed out on the gains since 1987 and the experience would have made them good investors.

Good judgement comes from past bad experiences; it is all a result of the lessons taken from previous experiences. 

Investing experience will give you the ability to make better choices in the future and this helps to increase your future wealth. 

Never use the excuse, “I don’t have any experience in this or that”, we all started from somewhere, and today it is possible to start investing in the markets on a shoe-string with all of these investing apps.

All the best

About this article

The information here is the opinion and experience of the writer and is not financial advice, therefore discretion is advised.

Read my other articles on www.robertastewart.com

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The Value of a Rainy Day Fund

The Value of a Rainy Day Fund

Written by R. A. Stewart

Having a rainy day fund will enable you to pay for unexpected expenses when they arise. This could be for medical expenses, dental expenses, car breakdown, or anything else which may crop up from time to time.

A rainy day fund is not something you use to pay for discretionary spending items. Gym membership fees, a weekend away, or a day at the races are not things you would dip into your rainy day fund for.

When setting up this account you need to set guidelines as to what can come out of this account and what is a no no.

If you are in debt then should you have a rainy day account?

The answer to this is yes, but you MUST pay off your debt first before start depositing money into your rainy day account because the savings on interest will put you into a better financial position.

It is not sensible to have money in an account which pays next to no interest when you are paying high interest on loans.

If there is one bad habit which can be a hindrance to financial freedom it is the habit of borrowing money for stuff which should only be bought with discretionary spending money.

I hasten to point out that if you have debt of any kind then you do not have any discretionary spending money until that debt is paid off.

Getting into the habit of living more modestly means readjusting your lifestyle to fit in with your monetary goals. There are things which people spend their money on which are really choices. They have the choice to spend it on this and that or do without it. 

A bad money manager fritters away all of their discretionary spending money so that by the time the next payday comes around they are broke.

Having a raining day account will provide a cushion again unexpected events which can cause finance stress.

Where to keep it: Keep this money in a separate, easily accessible bank account — ideally a high-yield savings account. It shouldn’t be hard to reach when you need it, but keeping it isolated from your day-to-day checking account prevents you from accidentally spending it on regular expenses.

The benefits of a raining day account are:

  1. It protects you from high interest debt. If you have a $1,000 bill suddenly crops up then your only option may be to borrow that money at high interest rates.
  2. It gives you peace of mind. Knowing that you have money readily available to pay for some unexpected expense gives you some breathing space.
  3. It prevents you from selling investments at the wrong time. If you have investments in growth or balanced funds then you may be forced to sell them just when the markets are down. Having a rainy day account will insure that this does not happen.
  4. It buys you time and choices. If you suddenly suffer a job loss, a rainy day account will buy you time to decide on your next move instead of just making a random choice out of desperation.

About this article

This article is of the opinion of the writer and may not be applicable to your personal circumstances, therefore discretion is advised. This is not financial advice but the opinion of the writer.

Read my other articles on www.robertastewart.com

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The Magic Power of Compounding

 

Written by R. A. Stewart

If you have any kind of financial knowledge you will know that the process of investing your money for years, sometimes decades and leaving your interest or dividends accumulate so that you end up earning interest off your interest is known as compounding.

Your investment starts to snowball once you have built up a decent portfolio. Using the process of compounding will enable you to achieve your goals faster.

Compounding also helps you to beat inflation which is a thorn in the side of those who are trying to get ahead in life. 

Investors who choose to have their interest or dividends paid into their bank account rather than have them added to their investment will find that their original investment will lose it’s purchasing power thanks to inflation. 

Your investing timeline is a big factor and the purpose of your investment.

If you are retired then you may prefer to have dividends paid into your bank account to help pay the bills and many do just that. The young ones usually let the income from their investments accumulate. This is common in retirement and mutual funds.

When you are saving for something then consider whether they are short-term, medium-term, or long-term goals. This matters because choosing the wrong type of investment for your timeline can affect how much you will end up with when it comes the time to cash in your investment.

For example it is not appropriate to invest your emergency fund in a growth fund due to it’s volatile nature because what is liable to happen is that just when you need the money the markets are down and there is less money available in your emergency fund than you thought there was.

At the other extreme, it is foolish to just leave your retirement fund in an ordinary savings account where you are paid minimal interest because inflation will erode the spending power of your money. 

Here is a break-down of the timelines of Short-term, medium-term, and long-term goals.

Short-term goals are within 12 months.

Medium-term goals are 1-5 years.

Long-term goals are over 5 years.

Getting into the habit of saving and investing will put you into a good position to withstand the financial shocks which life throws at you. This could be illness, job loss, family emergency, car breakdown, or anything else.

It takes vision to make some kind of provision for your future because you are preparing yourself for an event which may or may not happen. 

Then there are events which most people planned for such as buying a new car, further education,  saving for a house deposit, marriage, family, overseas trip, and retirement. People who have common-sense will make provision for events in their life which they expect to happen.

Investing your money for compound interest will help you to achieve your money goals sooner rather than having your interest or dividends paid to your bank account to spend. But it all depends on your personal circumstances.

About this article

This article is not financial advice and may not be applicable to your personal circumstances, therefore discretion is advised.

You may use this article as content for your blog/website or ebook.

Read my other articles on www.robertastewart.com

 

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The SpaceX Bandwagon should be treated with caution

The SpaceX Bandwagon should be treated with caution

Written by R. A. Stewart

Elon Musk has sold or is going to sell 4% of SpaceX.

The first thing I have learned is that when a company gets a lot of publicity and there are shares in the company the Fear of Missing Out or what it is often called FOMO takes hold of a lot of investors who want a piece of the action.

In the past FOMO euphoria has caused the share price of some companies which were just floated to be inflated and then they did not stand the test of time. The result being that investors were left with burned fingers.

That is not to say that SpaceX will suffer the same fate. 

But…

There are some negatives which mean that investing in this SpaceX can be classed as speculating rather than investing.

The main one being that a company which is hyped up by the media is usually over valued as has already been talked out. Then there is the fact that the company has not made a profit but is expected to.

Most people who are jumping on this bandwagon turn a blind eye to the possible pitfalls and risks of investing in such companies.despite all of the negatives. They get comfort from the fact that others are also investing in this company.

Investors need to take stocks and think of the past when others have jumped on bandwagons and got their fingers burned.

The 1987 share market crash, known as “Black Monday” an example of how the “Follow the herd” mentality led to paper fortunes being lost. Some investors borrowed heavily to purchase shares and as the company shares rose they were able to borrow more money using the inflated value of their shares as collateral. It all ended in disaster as the value of the shares were only a fraction of the loans taken out to purchase the shares.

Something is only worth what others are prepared to pay for. 

Many of those companies which fell during the 87 crash were basically paper shuffling companies which were not producing anything tangible. All of those investors who jumped on the bandwagon were responsible for creating an inflated value for these companies.

Then there is the Global Financial Crisis when lots of people lost their life savings because they invested in finance companies which were offering high interest rates. Some financial commentators warned that the high interest rates do not reflect the risk which investors are taking on.

Many of these companies were advertising on national television and used well-known advertising to promote these companies.

SpaceX may not fall into the same category of those companies which failed during the 87 crash or the GFC but if a herd of investors are buying shares in the company there’s little room for capital gain.

Always remember that if there is an opportunity for capital gain there is also a chance for a capital loss.

This all does not mean that SpaceX is a bad bet but rather where it all fits into your financial plan. If you just want an interest, albeit a small one, then go for it. You may just end up with a winner. Just follow the basic rules of investing such as “don’t plunge all of your life savings into one company.”

About this article

The contents of this article is of the opinion of the writer and may not be applicable to your personal circumstances therefore discretion should be advised. R. A. Stewart is not a financial advisor and the information and opinions here should not be taken as financial advice.

Read my other articles on www.robertastewart.com

 

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Inflation is the enemy of savers

Inflation is the enemy of savers

Written by R. A Stewart

If the return on your investment does not keep up with inflation your money will lose it’s purchasing power, therefore you must invest for a return which is greater than the inflation rate. This does not mean that you should speculate and take unacceptable risks with your money but rather make investments which have the potential to grow in the long term.

Imagine if you left $5,000 in an ordinary savings account for 20 years earning 0.5% interest, but the average inflation rate during that period was 3% your $5,000 may still be intact but it has lost over half of its purchasing power.

You may not have been robbed in the normal way of thinking but the value of your $5,000 was eroded by inflation.

When goods and services rise in price, this is inflation, your money buys a smaller percentage of those goods and services.

 

The Rule of 72: A quick way to see inflation’s destructive power is the Rule of 72. Divide 72 by the current annual inflation rate to find out how many years it will take for your money’s value to cut exactly in half. At a seemingly mild 3% inflation, your wealth loses half its purchasing power in just 24 years. At 6% inflation, that devastation happens in a mere 12 years.

Inflation does not treat all assets equally. It penalises those who have left their money in low interest accounts but rewards those astute investors who have made the right kind of investments.

It therefore acts as a redistributor of wealth. 

 

Wealth erosion is just not about the investments you make, it is also about the cash flow. If your costs this year are up 5% but your employer gives you a pay rise of 3% you have less cash to spend for your day to day expenses.

 

Inflation forces people to take risks with their money which they are not comfortable with just to keep pace with the falling spending power of their money. You are forced to move your money into the stock market, real estate, or other volatile assets just to protect its baseline value. This exposure to market crashes and liquidity issues is a secondary, structural risk that inflation inflicts on everyday savers. 

 

To protect their wealth people must shift their focus from being a saver to being an investor. Historically, certain assets have acted as excellent shields against inflation. Equities (Stocks) have acted as an excellent shield against inflation because companies can just raise their prices in line with the inflation-rate, this flows through to investors in these companies.

 

Inflation is a mandatory feature of modern economics. You cannot stop it, and you cannot opt out of it. The only variable you can control is how you store your wealth. By recognizing that cash is a melting ice cube, you can structure your financial life around assets that grow faster than the cost of living—ensuring that the wealth you build today is still meaningful tomorrow.

This does not mean that you should start taking unnecessary risks with your money and look for investments with a high return because you will be vulnerable to online scammers who target the greedy. The rule is, “If it sounds too good to be true, it most certainly is”

Having the common-sense to discern a good investment from a bad one sometimes takes a bad experience. It is important to read books by reputable financial writers to get a handle on investing strategies.

Another way to reduce the effects of inflation on your finances is to reduce your discretionary spending. Most discretionary spending is on stuff which does not add value to our lives and is worth only a fraction of what you originally bought them for.

It is important to point out that your strategy for dealing with inflation must be one suited to your personal circumstances, therefore discretion must be exercised when taking advice.

All of the best with your finances.

About this article

You may use this article as content for your website/blog, or ebook.

Read my other articles on www.robertastewart.com

Working in your chosen field

You may not have the talent or inclination to be an international sportsperson but you can be an asset in your chosen field and that does not mean that you have to be something out of the ordinary to become a valued member of society. A person who works at an entry level job can do so with such a good attitude that their diligence will not go unnoticed by their employers.

You may not particularly like your job and have any control over what happens at work but your attitude is something you can control. An employer with a bad attitude will take that bad attitude with them wherever they go. 

If you enjoyed this article then this ebook may interest you:

 

How to Enjoy Your Job

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The Rule of 72: The Ultimate Mental Math Trick to Double Your Money

The Rule of 72

Written  by R. A. Stewart

When investing your money there is a formula for calculating how long it will take your money to double. this is known as the Rule of 72. It is a quick, useful mental math shortcut used to estimate how long it will take an investment to double in value at a fixed annual rate of return.

Here is how it works:

The Formula

Divide 72 by the rate of interest or the expected rate of return per annum.

Note: When using this formula, you use the percentage as a whole number, not a decimal. For example, for a 6% return, you use $6, not $0.06

How It Works (Examples)

  • At a 6% return:
    72 divide by 6 = 12
    Your money will take approximately 12 years to double.
  • At an 8% return:
    72 divide by 8 = 9
    Your money will take approximately 9 years to double.
  • At a 12% return:
    72 divide by 12 = 6
    Your money will take approximately 6 years to double.

Reversing the Formula

You can also flip the formula to find the interest rate required to double your money within a specific time frame:

72 divide by 3% = 24

If you want your money to double in 24 years, you need a 3% return

72 divide by 7.2% = 10

If you want your money to double in 10 years, you need a 7.2% return

Why 72?

The number 72 is used because it has many low divisors ($2, $3, $4, $6, $8, $9, $12), making the mental math incredibly easy.

Mathematically, the exact number for natural log-based compounding is closer to $69.3, but $72 provides a remarkably accurate approximation for typical investment returns (between 5% and 12%) without needing a financial calculator.

Here is an example of how your money can double using the Rule of 72 Formula.

Expected return per annum (per year) is 8%

Maria has $1,000 to invest and she has decided to invest it in kiwisaver at an expected return of 8%.. Here is a breakdown of  how this initial investment will grow.

Age Investment Age Total

18 $1,000 27 $2,000

27 $2,000 36 $4,000

36 $4,000 45 $8,000

45 $8,000 54 $16,000

54 $16,000 63 $32,000

63 $32,000 72 $64,000

When an investment is left to compound it means that the interest or dividends are added to the  original investment which means that you are earning interest fro the interest.

This is how kiwisaver fortunes are being made.

At the other extreme, Jasmine invests $1,000 at the age of 18 but instead of just leaving the interest with her $1,000 investment she gets her interest or dividends paid into her bank account to spend. The spending power of her original investment of  $1,000 has been eroded by inflation over the years. This means that her $1,000 if she were to spend it when she retires would not go as far as her original $1,000.

Example

Age Investment Age

18 $1,000 27 $1,000

27 $1,000 36 $1,000

36 $1,000 45 $1,000

54 $1,000 63 $1,000

63 $1,000 72 $1,000

Retirees who have built up a good nest egg sometimes like to have their interest and dividends paid to them to help with day to day living costs but this is not suitable for the young ones who seek to build their wealth over time.

About this Article

The information in this article may not be applicable to your personal circumstances, therefore discretion is advised. You may use this article as content for your website, blog, or ebook.

Read my other articles on www.robertastewart.com

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Mistakes with Money

Written by R. A. Stewart

1 They make poor life choices

The difference between the rich and the poor is because their choices in life are different. There is a stark difference between what a rich person and a poor person does with their discretionary spending money. All of those satellite dishes on council estates tell a tale. A rich person will find ways to invest their discretionary dollar so that it multiplies while a poor person will spend all that they have and more when you consider the consumer debt that they take on. It is also a fact that the poor tend to have more children and having kids does not come cheap, so this further compounds their vulnerable financial position.

2 They do not save 

People in a poor financial state do not save money. They fritter away their money with no thought for the future. Their financial situation is made worse because of their poor lifestyle choices. They borrow for stuff which is not essential to everyday living and spend money on things of no lasting value and this leaves them with nothing to show for their labors.

3 They do not invest

Wealth does not increase when money is not invested. Instead it loses its value due to the effects of inflation. Investing gives you a financial education and this leads to better decision making when it comes to money matters. This in turn leads to better financial outcomes for the future.

4 They do not take risks with their money

Investing involves taking some risks with your money but this does not mean speculating which is really just gambling on some favourable outcome going in your favour. It is having a strategy of investing which enables you to make the most of what you have

5 They do not get financially literate

Lack of financial literacy is the number one reason why so many people are broke. Lack of ambition to rise above mediocrity is the main reason and there is little hope for the individual who lacks the will to improve their financial situation. I know that you are not one of those people otherwise you would not be reading this.

  1. They hang out with the wrong people

People tend to associate with like-minded people. You are the average of the person you spend most of your time with. You will learn money attitudes from whoever you spend most of your time with. 

  1. They have a poor attitude

Having a poor attitude to money is one sure way to live in mediocrity all of your life. When you receive a windfall do you invest it or spend it? Most people do the latter then accuse those who make the most of what they have as stingy. 

Having the will to improve your finances is one thing but putting it all into action is another. Reading books and investing some of your discretionary dollars is a starting point. It has never been easier for the person with limited means to invest in the share market with so many online investing plat forms. It is just a matter of having goals which align with your values. Having something to save for is what provides the motivation to save.

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Working in your chosen field

You may not have the talent or inclination to be an international sportsperson but you can be an asset in your chosen field and that does not mean that you have to be something out of the ordinary to become a valued member of society. A person who works at an entry level job can do so with such a good attitude that their diligence will not go unnoticed by their employers.

You may not particularly like your job and have any control over what happens at work but your attitude is something you can control. An employer with a bad attitude will take that bad attitude with them wherever they go. 

If you enjoyed this article then this ebook may interest you:

 

How to Enjoy Your Job