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DANGERS OF GETTING IN DEBT

This article is of the opinion of the writer and does not represent financial advice. If you get advice from a professional, see your bank manager or other financial advisor.

Debt is a dirty word….

Written by R. A. Stewart

“The borrower is a slave to the lender.” Proverbs 22:7

Those who are regular followers of my posts will have noticed one thing; that is I have never written any articles on “How to get out of debt,” “How to get credit,” “How to borrow your way to a fortune,” and the like.

There is a reason for this; that is I have never borrowed money or bought anything on credit. I would rather write about something I know about not what others are going through.

For me, writing an article advising others How to get out of debt would be just like me writing an article advising smokers how to kick their nicotine addiction because I have never smoked.

However, having said that I can give you my thoughts on the subject of borrowing and debt.

The first thing you have to understand is this;

It all has to be paid back plus the interest which means that whatever you purchase with borrowed money will always cost more than if you purchased it with cash.

The bottom line is this; “The crunch comes the day you have to pay it all back.”

There are different types of credit but the worst type is consumer credit. The credit card is the usual culprit in consumer debt.

The use of credit cards is the result of greed and selfishness. In order to qualify for a credit card one has to have a large enough income and have sufficient discretionary income to satisfy the card issuer that you are a worthy risk.

One would have thought, therefore, that if your income is such that you qualify for a card, that you would not need one in the first place.

There are some kinds of debt which are considered good debt however, and one of these is a mortgage because you have acquired an asset which can increase in value over time. Your family home is considered the best asset for you however, you still have to have the income to support the mortgage repayments otherwise the bank will not loan you the money.

Interest rates are so low at the moment that we can expect a strong property market in the next year or two as youngsters take the opportunity to get on the property ladder. The sharemarket is going strongly and I believe this to be due to the pitiful interest rates offered to savers as money which was invested in fixed term interest investments are now being reinvested in the sharemarket.

It is a time for investors to tread caution because there will be ads from finance companies offering higher interest rates to temp them. Those who got their fingers burned during the Global Financial Crisis will be well aware of the kinds of traps which ensnare investors with greed being the main one.

There are plenty of other options for investing your money with gold being one of them. If you are interested in getting involved then the link below will provide plenty of information;

https://affiliates.goldco.com/l/1VRW1MU2Q/

www.robertastewart.com

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TALKING ABOUT GOLD

Talking about gold
Written by R. A. Stewart
Gold has hit a record price lately and one just wonders how long will this upward trend continue. It is a good idea to keep to the stick to the basic rules of investing. Here are the main ones:
1. When there is a chance for capital gain there is also a chance for capital loss and investing in gold is no exception.
2. Something is only worth what others are prepared to pay for therefore the price you will receive for something whether that be gold, property, or shares is reliant on someone wanting to purchase it at the price you are after.
3. Do not speculate with money you cannot afford to lose but rather use your discretionary spending for that.
4. Diversify your portfolio in order to reduce your risks. In other words do not place all your eggs in the one basket.
5. Have a short term, medium term, and long term strategy for your savings and finances
6. Do your homework before investing in any company or commodity.
Read all you can about the various types of investments in order to make an informed choice.
There are various ways to take advantage on the record gold prices; you can invest in gold mining companies on the sharemarket, purchase gold coins, or invest in gold bullions.
Goldco has lots of information on their site for those interested in investing in gold, check it out below:
https://affiliates.goldco.com/l/1VRW1MU2Q/
www.robertastewart.com

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GOLD PRICE HITS RECORD LEVELS

Gold hits a record high

Gold has hit a record high and one wonders how high it will go before it starts falling but with interest rates so low and coronavirus not going away anytime soon it could reach dazzling heights. It is important to take a step back and not get carried away because the fundamentals of investing still need to be observed.

Whenever there is an opportunity for capital gain there is an opportunity for capital loss therefore never make speculative investments with money you cannot afford to lose but rather, use your discretionary spending for this purpose whether it be money you would have otherwise used for nights out or holidaying.

You do not necessarily have to purchase gold bullions to take advantage of the rising gold price. Investing in gold companies on the sharemarket is one option. You need to do your homework on the company and only invest in one with a proven track record. 

In New Zealand small investors can drip feed money into the sharemarket through Sharesies. This is not the only share trading platform but with Sharesies investors are able to invest money into individual companies.

I think investing in companies which mine gold may not necessarily be a good long term strategy because gold is likely to start failing at some point but nobody knows when that day will come. What is likely to happen is investors will see their gold and invest the money elsewhere. 

Investing in gold coins is another option providing you have a safe place to store it.

You can easily purchase these from ebay or other auction sites.

The beauty of owning gold coins is they can easily be converted back to cash.

Something is only worth what others are prepared to pay for and that is applicable whether it is gold, silver, property, art, or whatever it is.

It pays to do your homework and not invest in something unless you know something about it. Goldco has some informative articles on it’s website, you can find out more here:

https://affiliates.goldco.com/l/1VRW1MU2Q/

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COLLECTING GOLD COINS

Collecting Gold Coins  

 

People choose to become involved in various hobbies for several different personal reasons.  Some do it for the pure pleasure and fulfillment they get from the hobby itself (whether collecting, drawing, painting, writing, or some other hobby), while others partake of a specific hobby more readily for profit.  This is the classic divide between people in all aspects of hobby work, including the collection of gold coins.  Why would any individual choose to collect gold coins as a hobby over something more exciting and active?  Again, some people choose their hobbies based on their own ideas of pleasurable activities, while others simply aim to make a solid profit.

 

The reason an individual consider investing in a collection of gold coins can be influenced in several ways from many different sources.  Perhaps someone in this individual’s family – a father or a grandmother or even a favored aunt – collected gold coins throughout this individual’s childhood and simply built interest in the youth or eventually passed on the collection to the young one.  It was simply a matter of deciding whether or not they wanted to add more gold coins to this collection and based their entire decision on sentimentality.

 

Another way a collection of gold coins may have started in reality is through the receipt of a single gift – for a birthday or other special occasion this person received a gold coin from a relative or close friend.  From that small gift, the entire collection of gold coins began as a hobby.  In these cases, the person enjoys the game of hunting down rare gold coins more than actually acquiring them, or maybe he or she simply likes to display an impressive collection.

 

Others may collect gold coins to make a profit.  Some of these gold coins can be worth a great deal of money, especially rare gold coins, and often, such materials actually appreciate over time.  Often, a good collection of gold coins, especially one containing several rare or limited edition gold coins, can be appraised at a high price.

 

Hundreds of thousands of individuals across the world invest billions of dollars and hundreds of thousands of hours in the collection of gold coins, building huge lots that can be worth a great deal of money in the future.

 

Whatever item you are collecting it pays to gain knowledge about it by reading all you can about it because in this way you will be able to see something listed online at below its true value.

 

If investing in gold interests you or it is something you may want to look into then check out the website below:

 

https://affiliates.goldco.com/l/1VRW1MU2Q/

 

www.robertastewart.com

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LESSON FOR SHAREMARKET INVESTORS

The article below is of the opinion of the writer, if you require advice from a qualified professional then see your financial advisor, bank manager, or budget advisor

Do your homework lesson for do-it-yourself investors

Written by R. A. Stewart

On the news recently was an article about sharemarket investors in New Zealand who got their fingers burned by investing in a company whose price dropped dramatically after the company was revalued. The previous valuation was an error and a lot more than its real worth. Its share price tumbled quite dramatically.

Some young investors who used the share trading platform Sharesies got their fingers burned with one losing $10,000 as the reporter stated.

The share price increased by 1000% in a short time so looking at the maths of all of this, for a share price to increase by 1000%, it would have to be worth ten times its listing value so if the investors who was said to have lost $10,000 would have invested $1,000 to begin with.

So that would have been his actual loss.

The company was one I had never even heard of and the lesson here is to do your homework first. Don’t invest in anything unless you know something about it.

A presenter said, “Shouldn’t Shareies have done more to warn investors?”

My view is this; Sharesies are not there to spoon feed their investors, it is up to everyone to do their due diligence. With Sharesies, investors have the choice between investing in individual companies or managed funds. 

With managed funds, your investments are chosen by the fund manager. They are experts in their field and know what they are doing.

Investing in individual companies requires investors to use their own judgement but is a great way to learn about the markets and those who lose money in this way should learn the lesson and grin and bear it. 

If you are from New Zealand and would like to have a go at online investing then I recommend Sharesies, I am with them myself, you can join here:

https://sharesies.nz/r/377DFM

www.robertastewart.com

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MAKING MONEY MADE SIMPLE

Book review

Making Money made simple

By R. A. Stewart

MAKING MONEY MADE SIMPLE

Written by Noel Whittaker, “Making Money made simple,” is a very informative book on finance. It is a very practical guide which covers all types of investments. 

In it Whittaker says people’s financial situation places them into one of three categories;

1-The Seriously challenged

2-Those who are reading water

3-Those needing direction

He describes the process of setting goals and taking action.

He also describes the rule of 72 which is to divide 72 into the annual rate of return. This will give you the number of years it will take to double your money.

He says the keys to prosperity, which are, 1. Spend less than you earn, 2. Take responsibility for your financial future up to and including retirement, 3. Avoid the traps that reduce your wealth, and 3. Get inertia working for you and not against you.

Also in the book Noel gives his thoughts about the various kinds of investments.

Other issues he talks about are Managed Funds, gold and silver, borrowing traps, buying a home, and gearing-speeding up the way to wealth.

As far as financial books go, this is up there with the best. 

www.robertastewart.com

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THE MONEY SCHOOL

Book review by R. A. Stewart

The Money School

THE MONEY SCHOOL 

written by Lacey Filipich is an interesting book which explains the advantages and disadvantages of the various types of investments available. Lacey founded Money School in 2010 (Australia) to build financial literacy in adults. There is also a course for kids to teach them money skills. Lacey’s courses have been used by people from around the world to improve the financial well-being.

If you…

Ever wondered where your hard earned money goes.

Want to be financially independent years before your time

How to make the most of what you have.

Then this book is for you.

Here are some subjects she deals with;

Saving money and living within your means which is basically pay yourself first.

Diversifying your investing

Buying assets and avoiding bad debt.

On Property and negative gearing she says tax advantages are a terrible reason to buy property because they are so minimal. Negative gearing is where you spend so much money renovating the property that you show a loss on it can be claimed against your other income. She rightly points out that governments can change the tax rules so that property investors cannot claim losses against other income.

As far as Bitcoin and the like are concerned she says you may want to invest the money you would have otherwise have spent on the horses or casino in bitcoin instead. She does concede though that no one knows where crypto currency will go considering it’s short history.

Other types of investments such as bonds, cash, and the sharemarket are also covered.

www.robertastewart.com

 

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THE TACTIC OF AVERAGING

This article is of the opinion of the writer and not intended as financial advice. If you require qualified finance advice see your bank manager, financial advisor, or budget advisor.

The Sharemarket-Averaging

Averaging in the sharemarket is when you purchase shares in a company and as the share price declines you purchase more shares in the company therefore reducing the average price paid per share.

Here is an example of how averaging would work.

Price Number amount Price per share Total average

$4.00 1000 $4000 $4.00 $4000 $4.00

$3.50 1000 $3500 $3.75 $7500 $3.75 

$3.00 1000 $3000 $3.50 $10500 $3.50

$2.50 1000 $2500 $3.25 $13000 $3.25

$2.00 1000 $2000 $3.00 $15000 $3.00 

In this example you began by purchasing 1000 shares at $4 per share but in a sliding market where the price in this companies shares have continued to slide, if you buy this company’s stock as it’s share price continues to fall, the average price you will have paid per stock will be reduced. This is called averaging.

This kind of strategy can be used in the cryptocurrency market but it should be pointed out that only money which you can afford to lose should be risked in Bitcoin.

Investing in gold or other precious metals is another form of capital gains which can form part of your wealth-building strategy, you can find more about it here:

https://affiliates.goldco.com/l/1VRW1MU2Q/

www.robertastewart.com

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RETIRE TO GREYMOUTH

Retire to Greymouth in New Zealand

Written by Robert A. Stewart

Where would you like to retire in New Zealand if you had the choice?

How about Greymouth on the South Island’s West Coast?

It is a town of some 10,000+ residents, Greymouth is the largest town on the West Coast. It has all of the facilities of similar sized towns and more.

The best part of Greymouth to go searching for a house are Karoro, South Beach, and Paroa. These areas don’t have the problem of crime as others, and are not as cold as the centre of town.

Cobden bears the brunt of the easterly wind roaring down the Grey River, Coal Creek and Kaiata suffer from flooding now and again, and Blaketown gets the faces the strong westerly winds.

As for public transport, Greymouth is well-served by taxis, which includes a service to Hokitika airport, 26 miles away.

If you are keen to travel further afield, Greymouth is the only town on the West Coast with a train station. The world famous Tranzalpine is among one of the best train journeys in the world. It has to be on your bucket list. The train leaves Greymouth at 2pm arriving in Christchurch at around 6pm. It leaves Christchurch at 8 in the morning.

There are daily bus services to Nelson and Christchurch. Check with the ladies at the train station for time tables and brochures.

So what is there to do in Greymouth?

Heaps if you are an outdoor person who enjoys fishing, hunting, tramping, cycling, and other outdoor activities. 

The West Coast has lots of cycle trails and bush walks for those who feel energetic. The newest one is the Blackball to Punakaiki track, named, “The Paparoa Track.” This is by no means the only one. Ask at your local tourist information Centre for further information on these.

The climate on the West Coast is mild compared to other parts of New Zealand. In August 2019, Greymouth had snow for the first time since 1995. It was a novelty for the locals. That does not mean that other parts of the West Coast does not receive snow. Otira on the Western side of the Southern Alps receives it’s share of snow every winter. In fact, roads between Christchurch and Greymouth can be impassable for those without chains during periods of heavy snowfall.

Some of the small communities outside of Greymouth possess their own unique charm which makes them ideal for the retirees. Runanga, five miles north of Greymouth, Omoto just east of Greymouth, and Taylorville are all nice spots. Seaside places such as Rapahoe and Punakaiki further up the road are prone to erosion and will continue to cause headaches for those who own properties in these areas. Thought you should be warned. 

Many of the high street retailers have a store in Greymouth; these include The Warehouse. Countdown Supermarket, Noel Leeming, Paper Plus, and others. The town has a wide range of cafes, restaurants, and fast foods outlets, while all of the major banks have a branch in the town.

WIFI is available throughout the town and there is FREE internet access at the public library.

Before making a commitment to retire to Greymouth it would pay to visit the town for a week or two to get the feel of the area. You won’t be disappointed.

There is an American magazine called “Retire,” it has articles on the best places around the world to retire. You can obtain a copy here:

: https://robertastewart.com/retire/

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ASSESSING RISK VERSUS REWARD

This article is of the opinion of the writer and does not constitute financial advice; if you require advice of a professional contact your financial advisor or bank manager.

Assessing Risk and Reward

Written by R. A. Stewart

Assessing the risk of loss compared to the rewards is a balancing act and requires a bit of insight and knowledge of what you are investing on. This issue has been brought to my attention a couple of times recently. It was only yesterday I received an email from a website which holds bitcoin funds; the email was promoting a special offer. Invest a minimum of $100 US into Ethereum for 4% interest. This was not an offer to purchase Ethereum itself but rather than purchase Cryptocurrency as a means of making Capital Gains you would be investing money for a guaranteed return of 4%. This is a poor return for the risk involved and of course I gave this one a miss but with the low interest rates at present there will be some people who will be tempted if offered this kind of investment.

Finance companies that offer investors higher returns to investors are lending their money to higher risk borrowers; therefore there is a greater risk of losing your money. Prior to several finance companies collapsing in New Zealand during the Global Financial Crisis of 2007/2008, many financial advisors were saying, “The higher interest rates do not reflect the higher risk investors are taking on.” 

Many rejected that advice with disastrous consequences.

Sports betting and horse racing provide perfect examples of risk and reward.

In the Australian Rugby League Melbourne Storm were playing Sydney Roosters. Melbourne has won almost two-thirds of their games since their formation in 1999, therefore if you backed them in every game you would need average odds of $1.50 (1-2) just to break even, yet they were paying $2.20 (5-4). This was over the odds.

In the same weekend, Brisbane Broncos, a team that had lost it’s last five games was favourite against the NZ Warriors. Brisbane were paying $1.60 which was a poor price for an out of form team; they lost.

It is the same with horse racing. If there are equal favourites with one that has won one race in 14 starts and another that has had two starts for one win then which would you prefer? The one that had only been beaten once is the better bet.

You have to do the mathematics and ask yourself this question, “If I backed this horse at all of it’s starts would I be in front with the odds it is paying in today’s race?”

Getting back to investing in the financial markets one has to assess the risk and weigh it up as opposed to the rewards.

One very important point to remember is this; “Whenever there is a possibility of capital gain then there is also the possibility of capital loss.”

Investors need to get used to losing occasionally and get into the habit of taking calculated risks. If you have not had any financial setbacks it means you are not taking risks.

Taking risks is not the same as making foolish financial decisions. Just be sensible with your investing and invest according to your plan and timeframe when you require the money. 

This is some guide;

Short term (with one year) Conservative funds

Medium term (one to five years) Balanced Funds

Long Term (Six to ten years & longer) Growth Funds

Adding another category would be speculative investments.

There is no guarantee what will happen to the markets this decade and in particular post-covid, therefore it pays to diversify your investment portfolio and it is for that reason that some investors are turning to gold as another string to their financial bow but like all types of investments you have to do your research. 

You can learn about investing in gold from the link below:

https://affiliates.goldco.com/l/1VRW1MU2Q/

www.robertastewart.com