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3 Ways to lose during a Share Market Slump

It is easy to be very confident about your investments when all is going well and your investments are rising in value but it is when the market has taken a dive when your real character is revealed.

Investing needs to be done with the right mindset otherwise allowing your emotions to take over your decision making can turn out to be very costly in the long term.

The newspapers may say, “Investors have lost millions,” but the reality is they have lost nothing, well not unless they have sold their shares during a market slump.

If you have an investment strategy then the possibility of a downward trend should have been taken into account so a market downward trend will not be of a concern.

There are three ways which you can lose during a share market slide; here are are:

  1. Sell your shares

Selling your shares during a market slide is a guarantee that you will lose; more so if you bought your shares during the peak. The share market will have it’s ups and downs and is a long term game. If you are saving money for the short to medium term then investing in growth funds may not be the right place to have your money. On the flip side of that is a rising market can help you reach your savings goals faster. It is the catch 22 situation in that if there is an opportunity for a capital gain there is an opportunity for a capital loss.

  1. Change funds

Changing from growth funds to balanced or conservative during a market downturn is a way of guaranteeing a loss. In other words you are selling shares at a lower price than you bought them for. It is the issue of allowing your emotions to rule your better judgement. 

  1. Stop Contributions to your retirement fund

This is a sure way to lose during a market slump because you are missing out on bargains in the share market. You may not lose your money by not investing during a market slump but you are losing in other ways because if you decide to just leave your money in a low interest savings account the value of your savings is being eroded by inflation.

Talk about a sure fire loser!

The share market rewards consistency and that means making contributions through good times and bad. During times when the share market is during a bear market phase you will get shares at below their market value while during a bull market cycle you will get a lot of shares at above their market value. All of this will average out over a period of time and the longer you are involved in the share market and participating the more chance you give the law of averages to work in your favour.

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

 

Note: This article is of the opinion of the writer and may not be applicable to your personal

www.robertastewart.com

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Investing for seniors

 

Written by R. A. Stewart

 

Your age is a crucial factor in establishing your savings and investing strategy. Your 20s, 30s, 40s, and 50s are your savings years. It is these years when you build up your assets. 

Your 60s and 70s can be considered your spending years. It is when you tick off items on your bucket list while you are able to.

That does not mean that you do not have to work, a lot of older people are taking this option, not because they cannot make ends meet on their pension, but because they enjoy what they are doing.

In New Zealand, retirees will have access to their kiwisaver account once they reach the age of 65. Money invested in kiwisaver will be in growth, balanced, or conservative funds. Most people during their working life opt for growth or balanced funds.

It is time to decide whether to stay with the status quo or invest in more conservative funds. 

Your age and your health are the two most important factors in deciding which fund to invest your money in. 

Older people do not have time on their side to overcome financial setbacks such share market falls and so forth, therefore if you are 60+ it is a good idea to lean toward more conservative investments but still retain some exposure to risk.

It is worth mentioning at this point that New Zealand financial advisor and writer Frances Cook has a formula for calculating how much exposure you should have based on your age, and it is this…

Subtract your age from 100.

If for example you are aged 60 then only 40% of your portfolio should be invested in the share market.

I do not necessarily agree with this formula and my exposure to the share market is more than her formula suggests I have.

However, that is a personal choice; one that I do not necessarily recommend to you because your circumstances will be different as they are for different people.

If you are connected to the internet and you have a lot of spare cash in your account then I suggest that you place most of your money into an account that is not connected to internet banking. This is to reduce your chances of becoming a victim of internet scammers. 

With internet banking being the norm, this could be difficult in the future though.

In any case I still believe that it will pay to arrange your finances so that if you fall victim to a scammer then not all of your money will be lost. 

Don’t leave all of your money in the one account for goodness sake as some victims of scammers have.

If you are traveling then make sure you don’t have access to your life savings because if you do then so will be a scammer if they manage to get hold of your login details.

Scammers have all kinds of ways to trick people into handing over their login details.

Anyone can be a victim so don’t be proud by saying “I am not that stupid.”

As you get older you will have to invest more conservatively; that does not necessarily mean transferring from growth to conservative funds but investing some of your current savings into low risk accounts. The deciding factor is your timeline. How soon you need the money and funds which are going to be used within 12 months are best invested conservatively.

 

www.robertastewart.com

 

ABOUT THIS ARTICLE

This article is of the opinion of the writer and may not be applicable to your personal circumstances. Feel free to share this article. You may also use this article for your website/blog or as content for your ebook.