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Your Financial Risk Profile

Your risk profile is your tolerance to risk when you are investing your money. Your personal circumstances are what determines your risk profile.

To boil it all down to one factor, your timeline is the big factor to consider. If you are young, in your twenties or thirties then you have more time to recover from a market meltdown than someone in their sixties.

This does not necessarily mean that the young ones should invest all of their money in high-risk high return stocks because you could be in your twenties and have a short to medium timeframe with your investments.

It all depends on what you are going to use the money for.

Split it up in three categories:

Short term money is when you need the money for emergencies and everyday living expenses.

Medium term money is when you need the money within 5 years

Long term money is when you do not need the money for more than 5 years

Short term money

Rainy day account

Every day expenses

School fees

Medium term money

Saving for a car

Saving for an overseas holiday

Long term money

Saving for a mortgage

Contributions to your retirement fund

There has never been so many opportunities for the ordinary man and woman

 in the street to get involved in the markets with so many investing apps available.

You can invest in direct companies or in managed funds.

The latter is recommended.

Managed funds come in three categories:

Growth Funds (long term)

Balanced Funds (medium term)

Conservative Funds (short term)

Growth Funds have the most potential to increase your wealth but you have to be patient because investing in the share market is a long-term game.

Balanced funds are a combination of Growth and Conservative Funds.

Conservative funds are less volatile than growth or balanced funds but they have less potential to increase your wealth apart from just keeping ahead of inflation.

Once you have established your timeline for when you need the money then you can choose the appropriate investment.

One thing to add here is that if you have a rainy day or emergency account then this money is best left in an ordinary savings account at your local bank rather than invested in a conservative managed fund and the reason for this is that fees are higher with managed funds than at your local high street bank.

As already mentioned, your age is a factor in your risk profile but does that mean retired people should not invest in growth funds? Not at all, as long as you’re prepared to stomach any market meltdowns which could see your nest egg dwindle. People are living longer these days so a person retiring at 65 may have another 20 years of life ahead of them.

That being said; it is important to enjoy all of the things which money can buy such as life experiences and not just hoard your money for the sake of it.

Every one’s personal situation is unique, and a strategy needs to take all of this into account. Setting goals which are your own is important and not just trying to follow what others are doing. They have their own life to live, and you have yours. 

I am not saying that you should ignore sound wise advice, but rather listen and use your own sound judgment.

Taking responsibility for your own choices in life applies to your finances as well. Obtaining advice on where to invest is not a license to use your advisor as a scapegoat if your investments are not doing as well as you had hoped. Investing requires patience and time.

About this article: You may use this article as content for your blog, website or eBook. This article is of the writer’s opinion and may not be applicable to your personal circumstances therefore discretion is advised.

Read my other articles on www.robertastewart.com

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Factors which determine your Financial Priorities

Written by R. A. Stewart

Everyone has their own life to live and what this means is that everyone has their own unique set of circumstances which determines how they spend their money.

It is called setting priorities and there is no one size fits all when it comes to designing a life. As far as money is concerned, setting priorities is what we all do even if we are not consciously aware of it.

There are several factors which determine how you are going to spend your money:

The main ones being:

Your income level

The cost of living

Your health

Your age

Your marital status

Whether you have children

Your debt level

Your money goals

Your risk profile

The choices you make will have a major influence on your financial priorities. It is no secret that many people are simply broke because they have made wrong choices in life, not only how they spend their money but made some major mistakes such as getting involved with the wrong person or having kids out of wedlock. Having to pay child maintenance if your ex-partner or ex-wife is the one taking care of the children is going to kill off any chances you have of getting ahead financially.

If you are young, single, and smart, you will afford this kind of a life and live a prosperous life.

Age is a major factor in determining your priorities. Someone aged in their 60s will have different priorities than a person in their 20s.The young ones will be able to take more risks with their money because they have more time to recover from  a financial setback such as a share market tumble. A 65 year old is not going to set goals with a 30 year deadline but the twenty and thirty somethings do this all the time when they take out a mortgage.

There are several factors which will hinder your chances of any kind of financial success. Smoking, drugs, alcohol, and debt are the main ones. It is sad that some folk will prioritize their spending on cigarettes rather than buying good wholesome food for their children.

As far as these things are concerned it is important for the young ones in particular to make decisions which their future self will thank them for. I mean, honestly, I can thank my younger self for not taking up this disgusting habit. Another decision which I can thank my younger self for was my decision to join and contribute to a retirement savings scheme. In New Zealand it is called Kiwisaver.

About this article: This article is of the opinion and experience of the writer and may not be applicable to your personal circumstances therefore discretion advised. You may use this article as content for your blog or website.

Read my other articles at www.robertastewart.com

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Leaving a financial legacy

Written by R. A. Stewart

“Whoever can be trusted with very little can also be trusted with much, and whoever is dishonest with very little will also be dishonest with much.”-Luke 10:16

Should you leave your money to your kids or grandkids?

I think the answer to that question can be a “Yes” or a “No”.

New Zealand financial advisor Mary Holm wrote, “Don’t leave all of your money to your grandkids for them to spend, spend it yourself.”

I disagree with Mary but not entirely, because it all depends on how responsible the recipients of your generosity are with money.

If they are just going to fritter the money away on booze, cigarettes, drugs, and whatever then I would not leave them a cent or if you are in the UK, a penny.

But, if they are responsible with their own money then it is a good idea to help them out.

That does not necessarily mean just leaving them a sum of money and allowing them to decide what to do with it.

In New Zealand, the retirement savings scheme is called “Kiwisaver”, which cannot be accessed until you reach the retirement age of 65, but there are circumstances when one can access this money and one of these is to use some of the money to go for a deposit for your first home.

If someone is responsible and mature enough to be able to save for a mortgage then they deserve all of the help which they can get, but you just have to let go of those who have no interest in gaining financial literacy because if you do not spend your money then someone else will.

The alternative is to leave it to charity, but if you are going to do that then it may be a good idea to donate to a charitable cause while you are still alive; well if you are living in New Zealand because you will receive one third of your donations back from the tax man, provided of course that the recipient of your generosity is registered as a charity..

Young people do not give much thought about what happens to their property after they go and as a result do not bother to make a will. This can leave problems for their loved ones if the unexpected arises.

There was a case several years ago when a 20-year-old lady died unexpectedly and had money in her kiwisaver account, but her family did not receive any of it, the lawyers did because she did not have a will.

Problems will arise when one dies without a will and making a will is one less worry for the family to deal with.

About this article

The contents in this article are of the opinion and experience of the writer, therefore discretion is advised. You may use this article as content for your blog or website.

Read my other articles on www.robertastewart.com

 

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Risk and Reward

Investing risk and Reward

Written by R. A. Stewart

Weighing up the risks and rewards of various investments is doing your due diligence which is the responsibility of every investor.

There is no shortage of choice for investors to get involved with but it is a matter of choosing the ones which are right for your personal circumstances and goals.

Here are my personal views of some of the types of investments available:

High interest accounts with Finance companies

If a company is offering you an investment offering you a high interest; it can only mean that they are also charging high interest to their borrowers and the reason why some people are prepared to pay a higher rate of interest is because they have been turned down by a bank. This could only mean one thing. “These are people who are at a higher risk of defaulting on their loans.”

During the Global Financial Crisis of 2007-2008. Several finance companies in New Zealand went into liquidation. Prior to this some financial commentators warned people that the high interest rates being offered by these companies does not reflect the risk they are taking.

Investing in Gold through an online investing platform

Investors are able to invest in gold through the internet via apps similar to Sharesies, Hatch, and Robinhood but is this a safe way to invest?

I am not so sure because the problem with gold is that it provides no income, therefore investors are relying on capital gains to make money. 

It is the transaction fees which could kill off any likelihood of profit, however, having said that, this is a good way to get involved in gold as an interest for a modest outlay. Just make sure you only use money which you would class as discretionary spending money.

Investing in Bitcoin

Is investing in Bitcoin a safe investment?

My answer to this is that nothing is 100% guaranteed, Bitcoin is a volatile investment. If you are prepared to ride out the lows then you can make capital gains for you. 

It is not a substitute for your retirement fund and under no circumstances should you invest your entire life savings in bitcoin. The same is applicable to the share market and gold.

If you have discretionary spending money then using it to invest in Bitcoin is the way to go and who knows, you may become the next Bitcoin millionaire.

There are risks with Bitcoin but if you use your common sense and learn as much about the risks as you can then you can reduce your chances of making choices which can be costly.

Investors have so many options to invest these days but there comes the risk of losing due to an economic downfall therefore, it pays to be on the conservative side. That is to diversify and spread your money around. 

About this article

This article is of the experience and opinion of the writer 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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Make Saving a Habit

Make Saving a Habit

If there is one financial habit which will get you ahead it is this one…

Saving!

Why you must develop the savings habit

It is not how big your pay packet is, what counts is what you do with the money. Irrespective of your financial situation, it makes economic sense to save a portion of your income regularly. the mains reasons for saving are;

1-For unexpected emergencies such as car expenses, the washing machine breaking down, or dental bills.

2-To put aside money for your retirement.

3-Holidays or wedding expenses.

4-study expenses

5-Home repairs.

6-To save for a deposit for a home.

7-Saving for a car

8-Saving for a business

Consequences of not having any savings

If you do not have any savings of your own then if an unexpected emergency crops up such as the car breaking down then you may have to borrow the money to pay for repairs and every time you borrow money, the interest you pay means that you are always paying a higher price for goods and services bought with borrowed money than someone who always pays in cash.

Saving money requires you to live within your means and to live modestly. Good savers will not purchase items brand new when they can find the same item in a charity shop at a fraction of the price. 

Your choices will make or break you

Every time you make a choice there will be consequences, good or bad. The key is to make enough good choices to succeed and to minimize your bad choices. It is important to keep your eyes and ears open to what is happening around you and listen to wise people who have succeeded in their chosen field. Having said that, you must row your own boat and discover your own calling in life.

Joining your country’s retirement scheme.

Many countries around the world have their own retirement savings scheme where a portion of your gross income is invested in that country’s retirement fund and your money cannot be withdrawn until you reach retirement age which varies between different countries. (In New Zealand it is currently 65)

Accumulate investments.

It is a good idea to not only have a retirement fund but invest in various areas to increase your financial knowledge. The share market, managed trusts, and fixed term investments are all well worth getting into.

Don’t place all your eggs in one basket

Don’t under any circumstances place all of your eggs in one basket. There is no guarantee that a particular company will not go under irrespective of how solid it appears. After all, if a company is in trouble, its directors are hardly going to shout it out from the rooftops are they? During the economic downturn around 2008, many people lost a lot of money in failed finance companies and the tragedy was that many of these folk invested their entire life savings into the one company. In other words they placed all of their eggs into one basket. The number one rule is to spread your risk. Divide your money among several different companies. That way you stand a far better chance of protecting your financial assets.

Www.robertastewart.com

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6 Recession Proof Industries

6 Recession Proof Industries

Written by R.A.Stewart

When a recession occurs self confidence is reduced and spending is reduced. Some industries do well during recessions because whatever happens during the economy we all still have basic physical needs to meet.

Those industries rely on discretionary spending money are those that are most likely to be affected during a recession. In a period of belt tightening people will cut back on non necessities such as travel and the like.

A recession means job losses and while no industry is 100% recession proof there are some that will get through the recession better than others. 

Here are some industries which are expected to do better than average during a recession.

  1. Dairy Farming

Dairy products are basic grocery items and if you have the skills and the aptitude then you will be rewarded for your diligence. Retail outlets whose customers are farmers will buck the recession. 

It is only the price of dairy products which will affect retailers. If farmers have the money to spend they will spend it. 

Company to note: PGG Wrightsons 

  1. Healthcare

Health care will always be in demand, more so with an ageing population. If you are involved in this industry then you will always have opportunities for employment. The number of retirement villages is increasing in line with the increasing ageing population and this provides opportunities for investors with many of them being listed on the New Zealand stock exchange.

Company to note: Somerset

  1. Consumer Basics

There are basic items which are always in demand irrespective of what the economy is doing. Basic food items, toothpaste, toilet paper, shampoo, shaving foam, laundry detergent, and the like are recession proof.

Company to note: Any company which deals in these products.

  1. Pet Food & supplies

People will still spend money on anything related to pets during a recession because pets still need feeding. There is an increase in the number of cats and dogs handed to the SPCA during the cost of living crisis but there is still a lot of demand for pet supplies irrespective of what shape the economy is doing.

  1. Utilities

There will always be a demand for utilities because it is a fixed expense in every household. 

Companies to note: Genesis Energy, Mercury, Mighty River Power, and Contact Energy + others.

  1. Alcoholic Beverages

There will always be a demand for alcoholic drinks and has been for the past 2000 years and beyond. 

This list is by no means complete. There are dozens of industries which are recession proof; it is just a matter of choosing one which best suits your skill set if you are in the process of choosing your vocation or changing the one you already have. It is a good idea to add a few strings to your bow by working in different types of jobs or careers. 

As far as the share market is concerned, it provides some insight into which companies are likely to survive the cost of living crisis better than others.

This article is of the writer’s experience and opinion and may not be applicable to your personal circumstances.

Disclaimer: I may receive a small commission if you sign up for sharesies or coinbase.

Www.robertastewart.com

#recessionproof #personalfinance #retirementsavings

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6 Ways to Make Capital Gains

6 Ways to Make Capital Gains

Written by R. A. Stewart

There are basically two types of investment income. Capital Gains and Investment Income.

Investment income is income you receive from an asset, examples of investment income are interest on savings, rent from property, and dividends from shares.

Capital gains is the increased value of an asset; examples of capital gains is the increased value of property, shares, and other assets.

Some investments provide capital gains but no income; examples of these are precious metals such as gold, bitcoin, antiques and other collectable items.

Here are investments which provide Capital Gains:

The Sharemarket

The sharemarket offers excellent opportunities for capital gain. For most people, investing directly into the markets is not an option because the transaction fees once taken out for buying and selling shares make it not worth their while, however, there are plenty of managed funds investors with limited means can participate in. Sharesies in New Zealand  is one.  Investors can drip feed money into the markets with Sharesies and there is the option of investing in various funds or individual companies. Other similar types of platforms in New Zealand  are Investnow, Kernelwealth, and Hatch. These are not the only ones though. 

Your retirement scheme invests in managed (Mutual Funds) and they are also a form of Capital Gains. In New Zealand joining kiwisaver is a no brainer. KIwisaver is New Zealand’s retirement scheme.

Property

The property market has been a popular Captain Gains tool for a lot of investors using not only their money but other people’s money in the form of a loan. Income is gained from rents which pays for the mortgage. All related costs are the most popular form of capital gains and the easiest one for the novice investor to get their toe wet in the markets and learn as you go because there are several mutual funds which are available and the start up costs are minimal. In New Zealand Sharesies only costs $1 to get into which gives you the chance to invest in managed funds or individual companies. It is a great way for tax deductible. This type of investment can turn to custard such as wayward tenants. If you are prepared to take the risk then this investment may suit.

Your own home is a good source of Capital Gains if you intend to sell at some point.

Another way to get in on the property ladder is to purchase shares in property investment companies in the sharemarket. This can be done by investing in individual companies or managed funds which invest in property.

Compound Interest

You must have heard of compound interest; that is when you invest in fixed term accounts for x% interest. Instead of receiving your interest payments into your bank account you let them be added on to your principal and you earn interest on your principal and previous interest payments. This is called compounded interest. 

The increase to your capital is called “Capital Gains.”

Interest rates are very low at present (2020); in some instances lower than the inflation rate which makes this kind of investing less attractive. It is important therefore to do your due diligence and not be enticed by some finance company offering higher interest rates than normal, because with higher interest rates comes higher risk. These finance companies offering higher interest rates lend to higher risk types of borrowers. 

I am not saying that you should not invest your money in these companies but rather do your due diligence and at least diversify your portfolio rather than plonking all of your life savings into the ione company.

Gold

This one is purely speculative but can be a good hedge against a downturn in the markets. The one drawback with gold is finding a place to store it. Another way to invest in gold is buying gold stocks in the sharemarket. Purchasing gold coins from auction sites such as Ebay and Trademe is another option. As with other investments it pays to do your homework and read all you can about gold and other precious metals. 

Crypto Currency

Crypto currency such as Bitcoin and the like should be treated as speculative investments, therefore, only invest money in this if you can afford to lose it. What I am saying is use your discretionary income to purchase crypto currency. This type of investing can be a rollercoaster but one piece of advice which may be useful is to not just purchase all your crypto currency in one transaction but to do on a weekly, fortnightly, or monthly basis so that there is a chance that you have made a purchase when the currency is low. It is called averaging.

Collectables/Antiques

Investing in collectibles can give you a sense of satisfaction and profit when you intend to sell. You really have to know your stuff when dealing in antiques. Always remember, something is only worth what others are prepared to pay for. If someone is prepared to pay $1,000 for a painting at auction then that is what it is worth, however, if another painting is sold at auction for just $10, then that is it’s worth. The value of something is only a matter of opinion.

Recently (2020), some Banksy paintings sold for over $100,000 in New Zealand. The seller of the paintings paid a total of $500 for them in London (UK) some years earlier. It just shows how one’s eye for a bargain can be profitable.

For smaller items such as postage stamps, bank notes, beer labels, and so forth collectors can list their duplicates on auction websites to help fund their hobby.

This article is of the writer’s opinion and experience and may not be applicable to your personal circumstances therefore discretion is advised.

Feel free to share this article. You may use it as content for your blog/ebook.

 

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Financial know how

Readers are leaders.

INTRODUCTION

There is no excuse for financial ignorance when there is so much finance information available on the internet and in printed form. Becoming familiar with the various forms of investments will hold you in good stead for the future.

How to gain financial literacy

Your financial literacy is your ability to make financially smart decisions. You were not born financially smart or dumb; your financial knowledge or ignorance was developed over a period of time. I assume that you are not ignorant otherwise you would not be reading this. So without further ado, here are some ways of gaining financial literacy.

Your own experience

There is no better teacher than your own experience but that does not mean you have to go ahead and make all of the mistakes it is possible to make. It is more a case of using your personal judgment based on your knowledge and the advice of others but you will make mistakes along the way; it is a part of the learning process. It is a matter of who to take advice from and whose advice to treat with a grain of salt. 

An excellent way of gaining financial literacy is to register with one or more of the share market online platforms where you are able to buy and sell shares online. Only a minimal amount of money is needed to get involved. In New Zealand sharesies.nz is one such platform but is by no means the only one around. Other countries have similar such share trading platforms available.

Experience of others

The easy was to learn is from the mistakes of others. All you need to do is to keep your eyes open; many people do not do this and instead follow others like sheep. This is not necessarily the best way. In fact history has taught me that following the crowd is often the wrong way. A classic example is the share market when a stock is valued well above it’s true worth because so many people have jumped on the bandwagon and bought shares in that particular company because everyone else is doing it. It is young people without experience in the markets who are prone to this mistake.

It pays to go against the crowd; what this means is that you look for bargains in the markets whether it is gold, shares, property, and so forth. You do not have to experience what others are experiencing if you have the ability to assess what is a good investment and what is not.

Be prepared to listen to what the older generation have to say. Many of their opinions will be based on their own experience.

Books

Ignorance is no excuse as far as not being financially educated because your local library will stock books on finance. There are some terrific books on finance, some I recommend are, “Rich Dad Poor Dad,” by Robert T. Kiyosaki with Sharon L. Lechter. They have several other books which are recommended reading. “How to Be Rich & Happy” by Hans Jakobi, Australia’s wealth coach is another book I recommend. Hans also has several other books published, “Underground Knowledge” and “Due Diligence,” are two of them. “Making money made simple” written by Australian financial advisor Noel Whittaker is a good read. Frances Cook, Mary Holm and Martin Hawes are other excellent financial authors.

The internet

There is a lot of information available online on finance and investing; a simple google search will bring these up but like listening to your mates you have to use your own judgement when assessing the information from some sites and how it relates to your own personal situation. Martin Hawes and Mary Holm are both reputable advisors with good websites.

Newspapers

Most newspapers carry financial information and these are worth reading. Cut out articles that interest you; they make good reading in a year or so. 

www.robertastewart.com

ABOUT THIS ARTICLE

Feel free to share this article or post it on your site. You also have permission to use it as content for your ebook. My blog www.robertastewart.com has down to earth information about everyday finances. 

The information in this article may not be applicable to your personal circumstances so discretion is advised. I may receive a modest sign up bonus if you decide to join sharesies.nz

Start investing on a shoestring

Sharesies makes it possible for anyone to get into buying and selling shares. It is an online share market platform where you have the option of purchasing shares in individual companies or in various funds (managed/mutual funds). You can even start with $5. This is a no brainer because it gives investors young and not so young the chance to improve their financial literacy. There is certainly no substitute for experience when it comes to learning and this is applicable to everything else, not just investing.

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

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Diversification in the share market

Written by Robert A. Stewart

Diversification is a term we often come across in the investment industry but what does this really mean for the Mum and Dad investor and how can the ordinary investor profit from diversification? Here is an article written in simple language which everyday investors can understand.

Diversification in the share market

What it is and how you can make it work for you

Diversify, diversify, diversify are terms you will come across in the world of investments so what does it mean and how can you make it work to grow your wealth?

When someone says you should diversify your investments what is meant is that your investments are spread out among different companies and sectors in order to reduce your risk.

An investor may have shares in a phone company, a power company, a bank, an insurance company and so on.

This kind of diversification was once beyond the means of the average investor because one had to purchase at least $3,000 worth of each share just to make it viable because of the broker’s commission on each buy and sell transaction.

Not any more!

Online share market trading platforms such as Sharesies in New Zealand and Robinhood in the US have opened the way for anyone of any means to get involved in the markets. These platforms enable anyone to build up their financial literacy on a shoestring. There are lots of other online investment platforms similar to Sharesies and Robinhood which gives you a wide choice. 

With sharesies the minimum investment you can make is $5 but with Kernel Wealth, another online investment platform in New Zealand the minimum investment is $100. This is just an example of different rules for different companies.

Mum and Dad investors can buy into a range of diverse companies on a shoestring with sharesies and robin hood which in the long term is good for those astute enough to participate.

Investing in individual companies is not the only way to build up a diverse portfolio; the other way is investing in managed funds or as it is referred to in the States, Mutual Funds. 

When buying into these funds you are combining your money with other investors to purchase units  in the funds. Fund managers will purchase shares in a range of companies on your behalf.

The level of risk can vary depending on the industry in which the fund manager invests your money.

These investments are generally referred to as Growth Funds which have the potential to grow your savings but at a higher risk. 

Those investors who want a mixture of high risk and low risk funds will invest in what is called Balanced funds. This is a combination of growth and balanced funds. Investors may have the option of choosing which percentage of their investment they would like in growth or conservative funds..

Diversification is an excellent wealth building strategy for the average investors who wants to create a nest egg for the future. It is a matter knowing what you want to achieve with your investments and investing accordingly.

About this article

This article is based on the writer’s experience and may not be applicable to your personal circumstances therefore discretion is advised. You are welcome to use this article as content for your ebook or website. Feel free to share this article. 

www.robertastewart.com

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How to handle the share market crash

How to handle the share market crash

Written by R. A. Stewart

Cool heads are needed during a time when the value of your kiwisaver or managed funds have dropped in value. It is time to consider what your options are so here are some dos and don’ts to think about.

The dos

Do keep a cool head and weather the storm. Investing in the markets is a long term game.

Do keep reading the financial pages to keep up to date with the financial world.

Do ensure you still deposit at least $1040 into kiwisaver per annum in order to get the $520 tax credit.

Do remember that when the market has lost value, you will get more shares for your money when you buy.

Do keep adding other strings to your bow

Do keep saving a portion of your income.

The don’ts

Don’t change to conservative funds if you are in balanced funds

Don’t keep looking at your kiwisaver balance every day

Don’t lose perspective on life

Don’t listen to prophets of doom 

Don’t ignore your career/job objectives

Don’t stop saving

Always remember

Your greatest asset is your ability to earn an income. Become more valuable to employers and no one can take that away from you, not even inflation.

ABOUT THIS ARTICLE: This article is of the opinion of the writer and may not be applicable to your circumstances so discretion is advised. You may use this article as content for your ebook or website.

www.robertastewart.com