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TIMING THE MARKETS

This article is of the opinion of the writer and does not represent financial advice. If you require advice of a financial nature consult with your bank or other financial advisor.

Time or Timing in the markets

Written by R. A. Stewart

How important is it for investors to time the markets?

I know a retired man who cashed up his superannuation to purchase a car at a time when the markets were running hot. This was in February 2020 just as covid-19 was starting to spread throughout the world. The following month the markets started to slide. I told him, “no wonder you are smiling.”

That was good luck rather than good management, but you could consider it good timing even though it was a fluke. 

There are other cases of investors who were not so lucky.

One was an investor who changed from growth funds to conservative funds during the market slide only to find that they missed out on all of the gains when the market recovered, losing them thousands.

Another is an investor who used some of their retirement funds for a deposit on a house as they are able to do with kiwisaver, the New Zealand retirement savings scheme. That sounds fine, but they withdrew the amount they were able to during a time when the markets were falling and the losses were said to be fifteen grand. Just like the other investor who changed funds this investor also missed out on the gains when the markets recovered. 

The property market in New Zealand went crazy during 2020 due the the number of New Zealanders returning home and buying houses. A lot of people jumped on the property buying bandwagon. It is the F.O.M.O factor at play here. FOMO, for those who don’t know stands for, “Fear of missing out.”

One common theme coming out of all of this is that the property market is out of reach for first home buyers. It is still important for people to build up their asset base and find alternative ways to invest their money because having assets behind you puts you in a greater position financially for whatever is down the track. 

The key to investing is to do it the right way. You wouldn’t invest in growth funds if you were going to use the money for another purpose in the short term because the markets could take a fall just prior to you withdrawing the money. On the other hand if you have time on your side then investing in riskier funds may be an option if you have the temperament to handle the volatility.

An investor needs to decide whether this money is going to be used in the long term, medium term, or short term and set their goals accordingly. An investor’s risk profile is another factor to consider; it is easy to be an investor when the markets are going up but if the rollercoaster ride of growth shares is going to cause you to  lose sleep then you need to be a little more conservative.

The investor who switched to more conservation funds when the markets were heading south and missed out on the gains when they recovered allowed their own emotions to get the better of them. It is important for investors to get over themselves and train themselves to invest with the right mindset.

www.robertastewart.com

There are so many options for investing your savings with gold being one of them. If this is something you are interested in then check out the following:

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

 

 

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FINANCIAL SUCCESS

ABOUT THIS ARTICLE

Financial success can be as easy as making a few adjustments to your spending habits and your attitude. If you have self-control and a strategy in place you can avoid many of the traps which cause financial heartbreak to so many people.

8 Causes of financial failure

Struggling financially? A lot of people are even though they give everyone the impression that they have it all made. They are working, live in a nice house and drive a nice car, but are living from payday to payday. Here are 8 major causes of poverty in the first world. 

Living beyond your means

There is no getting away from it. If you spend more money than you earn then you must be getting your extra money from somewhere and that almost always means borrowed money, also called buying on credit. There is a cost to all of this and it is called interest. If you are in the habit of buying stuff on credit then the interest you are paying during your lifetime will add up to a fortune. The interest is sometimes called dead money because you have nothing to show for all of the interest you are paying.

Think of what you could have spent with all of that interest. It is almost too painful to even think about but if you are to avoid poverty then you need to pull yur head out of the sand and face the facts; your financial future depends on it.

Keeping up with the Joneses

Some people try to keep up with their peers with whatever they are spending their money on. It’s a compulsion that will cost you plenty. Living up to some kind of self image will severely dent your finances and will prove costly by the time you stop working. You may think your peers are doing well financially to afford this stuff or even think they have done well for themselves but what you don’t know may surprise you. That they may be up to their eyeballs in debt. Even if they are living within their means to finance their lifestyle it does not mean you have to keep up with them. 

Don’t be a people pleaser and live up to other people’s expectations, live according to what is the right course of action for your own circumstances and you will be far happier.

Consumer Debt

Consumer debt or dumb debt as it is often called is purchasing stuff with borrowed money. It is spending tomorrow’s income today. Debtors are usually oblivious to what is happening to the so-called stuff they bought on credit; that their newly acquired possessions are worth less the minute they have bought it. A crucial factor which needs to be observed is this; The money owing on the item is always more than what the item is worth. No one so many people are caught up in the debt-poverty cycle and it is not just those on lower incomes; in fact people on a middle income are prone to this trap. 

Commercial Greed

Commercialism during the 20th century has brought a lot of prosperity; it has provided jobs and created countless businesses but there is another side to it. The first world poverty which is caused by an insatiable appetite for things. People are not content with just stuff they need but keep wanting more. This all has to be paid for, it is money that could have been used to build a financial base for their future.

Addictions

Addictions are very expensive; just ask any smokers. One does not need to be a mathematician to calculate how much cigarette smokers are paying for their addictions. It is estimated at over $100 NZ per week. That equates to five grand per year and fifty grand per decade. No wonder many smokers are broke. It is the same with those who are addicted to alcohol and the pokies. 

Financial illiteracy 

Financial illiteracy is the major cause of financial poverty and it is not only those with low incomes who are financially illiterate; people on a high income can also be guilty of this. You hear stories of successful sports people who earned millions during their heyday but are broke years after their retirement. It is important to save and invest your money during your best earning years to set you up for when you are no longer earning as much.

Irresponsibility

Not taking responsibility for your own finances is irresponsibility. They will come up with all kinds of excuses why they have not joined kiwisaver or are not contributing. Excuses such as, “You can’t take it all with you,” “I might die before retirement,” or “I’m only young.” People who are irresponsible with their finances tend to be irresponsible in other areas of their lives as well. Making commitments whether it is in a relationship, owning a house or car, or saving for your retirement takes responsibility and that is what separates the men from the boys.

Bad Company

There is no doubt that bad company is a major reason why so many people are living in poverty. It has been said, “You are the average of the five people you spend most of your time with,” so it pays to examine who you are hanging out with and ask whether their attitudes and opinions on finance are influencing your money habits. In order to grow you need people to help and encourage you. This sometimes means separating from bad company. Some find that hard but in the long run it is all worth it.

ABOUT THIS ARTICLE

You have permission to publish this article, post it on your blog, use it as material for your ebook or do anything you wish with it as I do not copyright my stuff. My blog www.robertastewart.com has lots of financial types of articles.

If investing in gold is for you check out the link below:

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

Good financial habits can be developed from a young age.

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BOOK REVIEW

How to be Rich & Happy

“How to be Rich & Happy,” by Hans Jakobi is a good book for those who desire financial success by living within your means and investing wisely. The basis of the book is to take responsibility for one’s finances. It is not just a book about money-it is a book about your life.

The author talks about breaking free from mindsets which are holding you back. One of these is our speech, you will become what you speak about and your vocabulary could be keeping you poor.

You are in charge of your life, says the author and he explains how to take responsibility for your own financial future.

The starting point for planning your future is knowing what you want and this book shows you how to achieve your goals but if you are expecting to find the secret here then you will be disappointed because the old fashioned way of financial prosperity still holds true which is to live within your means, save, and invest your savings. The book outlines sixty ways of saving money which anyone can do.

An interesting chapter is freeing the genius within you. This is about finding your passion, developing it, and running with it.

This a book I recommend if you want to read one with practical down to earth financial advice on making the most of your income. It is recommended by world famous authors including Robert Kyosaki, author of Rich Dad Poor Dad and others.

www.robertastewart.com

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USING YOUR DISCRETIONARY INCOME

Making the most of your discretionary income

Discretionary income is what you have left over after paying your fixed costs. It is yours to spend on whatever you choose.

But….

How you spend this money can make a difference to your financial situation, but before this we have to ascertain what is discretionary income.

Rent/rates

Car running expenses

Power

Debt

Groceries etc.

People who have an addiction of some kind will prioritise their spending so that the addiction is included among their fixed expenses.

Everyone as an adult has freedom of choice unless they have debts which means their freedom is being eroded away in relation to their level of debt.

The old Proverb, “The borrower is a slave to the lender,” sums it up.

We all have some control over most of our fixed expenses such as groceries and power;we can cut down on these but with items such as rates/rent are fixed but even then we can choose to live in a more modest apartment or downsize.

The excess to your expenses is called discretionary income.

Another way of increasing your disposable (discretionary) income is to increase your income by getting a part time job, getting a higher paying job, or selling stuff online.

Saving your discretionary spending for some greater purpose instead of frittering it away gives your life some meaning. Instead of just letting things happen you are making things happen. Many people in 10-20 years time wondered what happened.

There is a major difference between saving your money and investing it. Astute investors use their discretion to increase their wealth by investing in higher risk stocks and shares, gold, and cryptocurrency. There are enough online platforms where you are able to drip feed money into these things if you are still climbing up the investment ladder. 

If you are interested in investing in gold then check out the site below:

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

The important thing to remember is that because you are using discretionary income you can fully afford to lose this money.

But then you may prefer to save for a holiday and tick off one or two items on your bucket list. The border closures will restrict your choice of places but here in New Zealand there are so many fantastic places to visit it is an opportunity to discover your own backyard. 

www.robertastewart.com

New Zealand has some of the world’s most stunning scenery.

Photo: Franz Josef Glacier

 

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HOW TO SET INVESTMENT GOALS

3 Factors which determine your investment strategy

You may be wondering what is the right investment strategy for you, but without knowing anything about you, any advice on which investments are right for you may in fact be the wrong ones. There are basically three factors that determine which are the right investments for you, they are:

  1. Your age
  2. Purpose for the money
  3. Your risk profile

Starting with your age. It would be rather silly of you to invest all your money in growth funds if you are aged 65 because if the market takes a dive such as was the case during the 1987 sharemarket crash and to a lesser extent, the GFC during the early 2000s you have less time to recover from these setbacks whereas the young ones have time on their side. 

The purpose for the money is the second factor.

Decide whether you require the money in the short term, medium term, or long term.

Short term would be up to a year.

Medium term is 1-5 years

Long term is longer than five years

Short term expenses would be, a bank account for emergencies, a holiday within a year, dental expenses, or t pay for the kids schooling for a year.

Medium term would be savings for a car.

Long term would be your retirement fund, saving for a house deposit, or saving for the trip of a lifetime.

Your risk profile is a determining factor in where you invest your money. If the thought of the sharemarket taking a dive will give you sleepless nights then investing growth stocks in the sharemarket is not for you. A better option would be managed funds where you will be given a choice between growth, balanced, and conservative funds.

It is important not to get into debt for there is a cost to debt and that is interest. Interest adds to the cost of goods bought with borrowed money, and this adds up to a fortune during a lifetime of borrowing for consumables. This is called bad debt because the value of the item declines over time.

There is such a thing as good debt though and this is your first home because the value of the property increases during the lifetime of the loan but even this is not always a good option for some people if you live a kind of transient lifestyle. 

“Everyone is to their own,” so only you know what makes you tick so your personal circumstances are the determining factors which govern where best to invest your savings.

You must do your homework before you invest in anything, whether that is the sharemarket, managed funds, or gold. There is so much information available on just about everything, and that includes finance. It is just a matter of learning the ropes and having a financial strategy which suits your personal circumstances.

If you think investing in gold is right for you then check out the site below:

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

www.robertastewart.com

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THE BENEFITS OF DOMESTIC TOURISM

Advantages of Domestic Tourism

The Borders may have been slammed shut to tourists but domestic tourism offers advantages that overseas tourism does not.

For those who want to take a holiday in their own backyard there will not be such a hassle getting accommodation in tourism hotspots; it is a good opportunity for KIwis to see their own country before the borders open up and will be in 2022 at the earliest.

Certainly, we need tourism to return in order to pay off the covid debt.

But in the meantime businesses have no option but to turn to domestic tourism.

For tourist operators, domestic tourism offers repeat business. 

Someone coming from say China will pay one visit, return home, then save up for a holiday somewhere else, but Kiwis will often visit the same place several times over.

It will be the same in other countries too. It has been said 20% of your customers provide 80% of your revenue so it pays to take care of ALL your customers and they will repay you with repeat business.

People will happily fork out money to pursue their passion whether that be skiing, whitebaiting, duck shooting, sport, or whatever. A good example are the white baiters who travel to Haast every year providing accommodation providers and other businesses in the tiny West Coast township with much needed income during a quiet time.

What this means is repeat business for those serving the domestic tourist market and the local population.

It is therefore important to form a good relationship with your customers by keeping them up to date with goings on in the business and the local district.

An autoresponder can do this for you. 

What is an auto responder?

It is a system of sending emails to hundreds or thousands of people who have agreed to be on your email list.

Using an autoresponder helps build relationships with your customers and that is so whether you have a brick and mortar business or operate solely online.

Aweber is a popular email marketing autoresponder; you can join here for your FREE 30-day trial;

https://www.aweber.com/easy-email.htm?id=499027

www.robertastewart.com

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MISTAKES MADE BY INVESTORS

Mistakes made by investors

Mistakes can be costly, therefore, as an investor doing your due diligence will payoff in the long run. However, there is no guarantee that you will not make any mistakes during your lifetime. As the saying goes, “He who has never made a mistake never made anything.”

As an investor all you can do is minimize the chances that something will occur which could cause substantial financial hardship for there are no guarantees.

Mistake number one

Not doing your homework

“Ignorance is no excuse,” is a commonly used saying and that is applicable in finance as well. Many investors have had their fingers burned by blindly investing in something they know nothing about. With so much financial information in the newspapers and on the internet there is absolutely no excuse for being uninformed.

Mistake number two

Placing all your eggs in one basket

Diversification is a key strategy for a balanced portfolio. What this means is spreading your investment over different kinds of industries and having a balance between growth, balanced, and conseervative investments. How much you place in each investment depends on the purpose of the money, your age, and risk portfolio. 

During the Global Financial Crisis of 2007-2008 a lot of investors lost money in finance companies that went bust with a common complaint being the loss of an entire life savings. The mistake here was that some investors placed all of their finances in the one basket.

Mistake number three

Not taking responsibility

Taking responsibility for your own finances is important but some people by their very nature like to have someone to blame if their life or finances turn to custard so they will take the advice of someone. What sometimes happens is they will listen to a number of opinions and go with the one which aligns with their own. If things are going well they are smart or so they think they are and if things turn bad then it is someone else’s fault.

Mistake number four

Listening to the wrong people

The biggest downfall of unsuccessful people is they associate with bad company and take on board their opinions and bad money habits and attitudes. It has been said you are the average of the five people you spend most of your time with. If you do not have the opportunity to mix with successful money managers listen to them on youtube and register with their websites. It is all about developing the mindset of successful people.

Mistake number five

Keeping up with the Joneses

Trying to keep up with the Joneses will kill off your chances of any kind of financial success especially if you are on a lemonade budget and they have a champagne income. Everyone has their own personal circumstances and it is up to you to manage your life and finances according to your circumstances.

Mistake number six

Not living within your means

This is the most basic rule of finances, one which requires you to minimize your living standards to a level which allows you to live within whatever income you have. So many people increase their living standards to suit their income and never get ahead. Financially smart people invest any increase in income to increase their wealth while poor people just spend and windfall they receive.

Mistake number Seven

Not Having a Financial Plan

“If you fail to plan you plan to fail,” is a common saying, and it is no more true with your finances. Planning for the future will make things easier for you when the going gets tough. Job losses, car breakdowns, health issues, and retirement are all issues that can be financially challenging if you do not make allowances for these.

www.robertastewart.com

Gold has hit a record price, if you are interested in investing in gold check out the site below;

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

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GETTING YOUR FINANCES IN ORDER

Saving for whatever…
Written by R. A. Stewart
Establish your savings goal. Are you saving for your retirement, a new car, a deposit for a home or whatever. This will be the determining factor when choosing where to invest your money. It is important to note that you can have several different savings/financial goals at the same time with a different type of investment with each goal.
For example, you may have a short term goal to pay off your TV set, a medium term goal to save for your car, and a long term goal to put away money for your retirement.
Your financial goals should be split up into three categorys; short term, medium term, and long term.
The category will determine where it is best to place your money.
1. SHORT TERM
Oncall-6 months
This is money on standby and used for general household bills such as power, car running expenses rent, and so forth.
Where to keep this money; Ordinary savings account or bonus bonds
2. MEDIUM TERM
6 months-3 years
This is money being saved for a car, appliance, overseas trip.
Where to keep your money; Bonus Bonds is a good option but mutual funds is an option but invest conservatively.
There are a number of managed funds which are cropping up and you do not have to have much to get started with them. A good one for the beginner is sharesies (in NZ). If you are from another country there will be companies similar to Sharesies you are able to invest with.
3. LONG TERM
3 years+
Saving for a house deposit and building a nestegg for your retirement are examples of long term goals.
Where to keep your money; kiwisaver is an ideal investment to drive you to your savings destination because the incentives will help your savings grow.
Some tips.
Pay off debt first because if you are able to pay off a debt where your are paying say 10% interest on the debt then the interest saved from the paid off debt is just as if you had been paid the 10%; as the saying goes, “A dollar saved is a dollar made.”
Stuff happens in life where circumstances change therefore you need to be prepared to be flexible.
Take a long term view of your investments. It is time and not timing which is the key to investing. As you gain more experience with investing, your risk profile will improve.
Read all you can about finance and the sharemarket. Knowledge will help you overcome your fears when investing.
PLEASE NOTE; The information in this article is the writer’s opinion basnk.ed on his experience. If you requiire financial advice see your bank.
www.robertastewart.com

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THE PYRAMID OF LIFE

Life is one big pyramid

Written by R. A. Stewart

Rugby is the national sport in New Zealand with about 50,000 Kiwis who play the game, possibly more so how many of them will be good enough to play for the All Blacks? 

There are fifteen players in a rugby team + five reserves I think it is. This is a very small percentage of the total number who play the game.

THe Next level down is the Super Rugby; there are five teams in the competition, this year the participating countries have their own competition due tp Covid-19 and border restrictions. The other countries involved were Australia, South Africa, Argentina, and Japan. 

The five teams in New Zealand each have a pool of thirty players which mean 150 rugby players are good enough to reach this level.

Next level down is the provincial competitions which has a lot more teams involved which mean a greater pool of players taking part.

Do you see what is happening here?

Life is like a pyramid with the elite at the point of the pyramid but with each level down you will find more participants.

Those at the top have exceptional talent but have worked their butts off to reach that level.

Talent can only take you so far but diligence and the right attitude will take you further.

The point of all of this is that to get yourself further up the pyramid in any sphere you have to do something which the majority are not. 

A lot of youngsters like to booze at the weekends but if your ambition is to be an international sportsman then you need to give up the booze. 

The same is for those who want financial success. There are sacrifices which have to be made in order to achieve your financial goals. 

I think it was J. Getty who once said, “If you divided the world’s wealth equally between its inhabitants people would after a period of time be in the same financial position as there were previously.”

What he was saying is the mindset of people will dictate what they would do with the money.

It is important therefore to network with like-minded individuals who have the same goals as you or have at least achieved what you are setting out.

www.robertastewart.com

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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