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Invest and Forget

Invest and Forget

Written by R. A. Stewart

I know a couple of people who have money invested in the share market and keep track of how their investments are going by checking up on their shares online just about everyday. I told them that I just invest in such and such and then just forget about them. 

For me, there is no point in worrying about how your share portfolio is going because what the markets are doing is out of my control.

If you have chosen where to invest your money and it is in line with your values, your goals, and your risk profile then what the markets are doing should not be a concern for you.

Financial experts will tell you that if you are investing for the long-term, 10 years plus, you should be a little more aggressive with your investing.

Some investors get panicky when the markets are down and shift funds. Then what happens next is that they miss out on the gains which would regained their previous losses, if you can call it that, because these are just paper losses. They are temporary, but if you decide to sell when your shares are down or switch to conservative funds then these losses are locked in.

Some investors change fund managers because their funds are not doing well. It is worth noting that past record is no guarantee of future performance, so even if a particular fund manager out performed all others this year it does not necessarily mean that they will continue this trend.

If you have chosen which fund type to invest in then how the markets are performing should not be an issue.

Your savings goals can be categorised in one of three goals; they are:

Long-term goals

Medium term goals

Short term goals

Long-term goals are money which is not needed for 5 years+. Retirement savings and house deposit savings are examples of long-term goals.

Medium-term goals are money not needed for 1-5 years. Saving for a car or the trip of a life-time fall into this category.

Short-term goals are money needed within 12 months. This could be your emergency fund set up for unexpected expenses such as an appliance or car breaking down. School expenses, etc.

There is no one shoe which fits everyone, therefore it is up to each individual or couple to set up their own financial plan according to their goals and personal circumstances.

Which funds are best for you?

There are three types of funds to choose from when you invest in a managed fund, also called mutual funds. They are:

Growth funds

Balanced funds

Conservative funds.

Growth funds have the most potential to grow your wealth but are the riskiest. They are for long-term investing. It is suitable for young people because they have more time to recover from a market meltdown.

Balanced funds are a combination of growth and conservative funds. They have the potential to grow your funds but are not as risky as growth funds. 

Conservative funds are safer than growth and balanced funds but are not as profitable. They are more suitable for short and medium-term investing depending on how much risk you are prepared to take on.

Once you have chosen where to invest your money, you should just get on with your life and turn your attention to other things. In other words, “Invest and Forget,” because what happens in the money markets is out of your control.

About this article

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

Read my other articles on www.robertastewart.com

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The Advantages of Saving Money

The Advantages of Saving Money

Written by R. A. Stewart

“It is not how much you receive but rather what you do with it after you receive it.”

The benefits of saving a portion of whatever you receive cannot be understated. We all have a choice in what we do with our money and unless you are being controlled by someone else then your choice of what happens to your money is the major influencer of your long term financial wealth.

It is the choices you make in life which will have a major influence on your financial outcome. That is the choice of entering into a relationship, the choice to purchase a car, and so forth. In many instances there are people who bleat about the cost of living crisis but at the end of the day their situation is often their own making.

It is all about priorities. 

It can be said that stupidity is one reason for poor financial outcomes. I mean how else do you explain why there are people who are subscribed to Netflix and satellite TV, but have not joined Kiwisaver, New Zealand’s retirement scheme.

Saving for something and not just for the sake of it will give your life some purpose.

If you are wondering what to save for, here are several ideas:

  1. Your retirement
  2. An emergency fund
  3. An education fund
  4. Travel
  5. Major Purchases
  6. Your Hobbies
  7. Your Wedding
  8. Home repairs
  9. Start a business

There is a stark difference between saving to build up your wealth and saving to spend. When you are saving to build up your asset base you are increasing your resilience to life’s financial shocks. Saving to spend means that you are back to square one once your money is gone. This is particularly so when it comes to travel. 

Other expenses such as further education can be a good investment but you have to be sure that it is what you really want to do otherwise it will be just a waste of time and money.

Setting up an emergency fund is an excellent way of having money available for unexpected expenses which may crop up from time to time. 

Home repairs may add value to your home but it all depends on your priorities. Retired people may prefer to spend that money on travel.

Here is something to think about:

Having your assets in the share market means that your assets can be quickly turned back into cash when you need it. This is not the case with property which may take months to sell.

Another thing to consider with property is that many of the home improvements may not even increase the valuation of the property which means that it is money which is spent with no return.

Saving and investing money is a good habit to get into, it leads to a more prosperous future. Borrowing money and getting into debt is a bad habit which can lead to a poor financial outcome. Even if you do manage to pay everything by the due date, you have to consider whether you are making the right choices in your choice of lifestyle.

Paying interest on borrowed money over a lifetime is an expensive way to purchase stuff. It is better to save up for things rather than borrow, that way you will pay the retail price of whatever it is you are purchasing.

The bottom line is that living within your means is the key to managing your money successfully and that requires discipline.

Read my other articles on www.robertastewart.com

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Reasons why investing outside of NZ Makes Sense

Written by R. A. Stewart

“Invest in several places because you do not know when misfortune will strike”-Ecclesiastes 11:2

Is advice given by Solomon and it is advice worth heeding because you do not know when a market downturn is going to happen. It could be the result of political turmoil, a natural disaster, or another pandemic.

When I talk about investing in several places, it does not only mean investing in several different companies, but rather investing offshore as well.

It is called diversification.

There are two main reasons why investing offshore makes sense.

  1. You have access to industries not available in your own country.
  2. You are able to buy into companies that lead the way in AI

There are global brands that you have access to when investing globally, some of these have given excellent returns over a long period of time. 

With such a larger pool full of world-leading industries and companies to invest in, you will have the opportunity for better returns.

On the other hand, New Zealand is a small country with an economy vulnerable to unforeseen events such as foot and mouth disease or natural disasters.

If foot and mouth took hold in New Zealand -it would likely result in the dollar plunging and more expensive imports. Tourism would most likely be affected, and GDP would fall to unprecedented levels.

There are other things which can affect our economy such as a trade war or a serious climatic event. 

It is a good idea to invest globally to mitigate the risk of exposure to a market meltdown in your country.

Check your retirement funds to see what percentage of it is invested globally. Even if most of your retirement fund is invested locally, you can still get involved in overseas markets on a shoestring.

One online platform for doing this is Hatch.

Hatch is a New Zealand based investment platform. If you are from a country outside of New Zealand then it will pay to check out those which are available in your own country.

Before you start  investing with Hatch or any other investing platform, it is important to know what kind of investments they have available and how they align for your investment goals and risk profile.

Invest for the long-term and avoid making short-term decisions based on emotion. Focus on your investment goals and above all be patient. Don’t get fixated on your balance. If you have invested according to your risk profile then your balance should not be a concern.

Smart investors mitigate the risk to their capital by investing in a diverse range of assets and industries. Investing in Hatch offers a gateway to global markets and a diverse range of investment opportunities. By understanding the platform, conducting proper research, diversifying your portfolio, and staying informed, you can potentially build a strong investment portfolio suited to your financial goals. Remember, investing involves risk, so it’s crucial to invest responsibly and stay informed about market dynamics and your investment choices.

Join Hatch here:

Invest in Hatch here

ABOUT THIS ARTICLE

The contents of this article are of the 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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Tailoring Personal Finance to Your Risk Profile and Goals

Financial planning for your personal circumstances

Written by R. A. Stewart

“No one shoe fits all sizes” is a saying which is applicable to financial planning. No two people are the same. Personal finance needs to be tailored to one’s personal circumstances.

There are several factors which need to be taken into account when deciding what to do with your money. The one factor which covers all of your circumstances can be summed up in two words, “Risk Profile.’

Your risk profile is the amount of risk which you can comfortably cope with. “If there is a financial meltdown, would it affect your lifestyle?” is a question which needs to be asked, before you commit to investing in such and such.

Your timeline is one of the factors which make up your risk profile. The longer your timeline, the more time you have to recover from a market meltdown. When you are young you are able to invest more aggressively into growth funds, but that does not mean that you should invest every single dollar you own into growth funds because it all depends on what the purpose of the fund is.

You may be young and have some money invested in growth funds, some in balanced funds, and some in conservative funds.

Everyone has different goals and different living arrangements, which mean that your financial plan must be set according to your personal circumstances.

Setting goals is important. It gives you a destination to travel to. Without goals life will take you where it takes you.

There are three categories for goal setting:

Long-term goals (over 5 years)

Medium-term goals (1-5 years)

Short-term goals (up to 12 months)

A long-term goal can be savings for your retirement or a house deposit.

A medium-term goal can be saving for an overseas holiday or a car

A short-term goal can be saving for an emergency fund.

Growth funds are ideal for long-term savings goals.

Balanced funds are ideal for medium-term savings goals

Conservative funds are ideal for short-term savings goals.

Your tolerance to risk is a factor. There is no point investing in something if the possibility of loss is going to give you sleepiness nights. Having said that, successful investors learn to take a financial hit without losing heart. They learn the lesson and apply it to future investments.

During covid, the markets went through a bad spell. Many Novice investors switched from growth to conservative funds. The markets recovered and these investors turned a temporary loss into a permanent one.

The moral of this is to plan and stick with your plan because if you have invested according to your risk-profile then what the markets are doing should not be an issue to you.

People make different choices, some make right choices and others make wrong choices. It all leads to different outcomes. If you want a different outcome to what you have been getting then make different choices. It is as simple as that!

All the best.

ABOUT THIS ARTICLE

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

Read my other articles on www.robertastewart.com

Explore Freely, Spend Wisely: The Ultimate Travel Companion

 

For the ultimate freedom to explore these incredible routes, get a Wise Travel Card. One card holds multiple currencies, letting you pay effortlessly in NZD for fuel, snacks, and accommodation. It automatically converts your money at the mid-market rate, saving you from costly bank fees. Top up and manage your funds instantly via the app, making it the smart, secure, and simple way to travel. Spend like a local and focus on the scenery, not the small print. Get yours and travel with ease.

https://wise.com/invite/dic/roberts10486

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The Benefits of getting into the habit of Investment

 

Written by R. A. Stewart

“A dollar saved is better than a dollar made because you don’t pay tax on a dollar saved”-Anonymous

Saving money from your wages is easily done for most people. It is a habit which can reap dividends in the long term. No pun intended.

A lot of people are good at saving money but have not got into the habit of investing.

In order to build up your wealth, it is imperative that you develop an investor mindset. These days in the internet age it is not necessary to be rich to invest, but you certainly need to invest to become rich.

Investing increases your financial literacy. The only way to become a good investor is to become one and with that experience will come knowledge. Reading books about personal finance is one thing but in order to turn the information you read into knowledge it is necessary to put into practice what is taught in those books.

I am keen to point out that not everything in personal finance type books will be applicable to your personal circumstances, but if you know where you are going then you will have the common-sense to discern which advice is applicable to your situation.

Becoming a good investor requires practice, practice, and more practice. To become a good investor requires an investor mindset. If you can handle the highs and lows of the markets and not panic when the market goes down. 

During market slumps we hear stories about people who changed from growth or balanced funds to conservative funds. A week or so later the market rallies and these people miss out on the rises which would have seen their retirement funds rise. It is a lose-lose situation for them. 

If you have chosen investments which are compatible with your risk-profile then the market volatility should not concern you.

“Inflation is the enemy of the conservative investor.”

In order to build your wealth it is necessary to take calculated risks. This is applicable in every aspect of life. Taking risks is not the same as being reckless or gambling. The key is to spread your money in different places. Taking a risk on making a killing by investing your whole life savings in one company is just stupidity, yet this is exactly what some people did prior to the Global Financial Crisis and the company went belly up. 

These people blamed others for their loss. 

“If it is going to be then it is up to me” is a rule to live by. This does not mean rejecting sound advice, but rather having the common sense to know whether the advice is good or bad.

At the end of the day, it is up to each individual to set up their own system for their finances, one that fits in with their goals and personal circumstances.

About this article

The contents of this article are of the 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

Explore Freely, Spend Wisely: The Ultimate Travel Companion

 

For the ultimate freedom to explore these incredible routes, get a Wise Travel Card. One card holds multiple currencies, letting you pay effortlessly in NZD for fuel, snacks, and accommodation. It automatically converts your money at the mid-market rate, saving you from costly bank fees. Top up and manage your funds instantly via the app, making it the smart, secure, and simple way to travel. Spend like a local and focus on the scenery, not the small print. Get yours and travel with ease.

https://wise.com/invite/dic/roberts10486

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It takes Vision to make Provision

Written by R. A. Stewart

“Where there is no vision, the people perish.”-Proverbs 29:18

Financial planning takes vision. It also takes a bit of maturity and responsibility.

The choices you make today will affect the choices you have available to you tomorrow.

It is all about making provision for unforeseen circumstances and not all circumstances which you may find yourself in are unforeseen. 

If you have plans to get married and have children then that is not an unforeseen expense, therefore, if you are smart, you will make provision for such life changing events.

An unforeseen event is one where you have been injured in an automobile accident or were to have an accident at work.

For this reason it is important to set your finances up in such a way as to have some kind of cushion against financial shocks.

There is a scripture in Matthew 25:1-13 about ten girls. Half of them were wise and half of them were foolish. They were all invited to a wedding. The wise ones brought enough oil for their lamps, but the foolish ones did not. The foolish ones had to go back and get some more oil for their lamps and by the time they arrived at the wedding the door was closed on them. 

That was the consequence of not making provision for their journey. 

The wise girls made provision for their journey but the foolish ones did not.

There are consequences to living for today with no thought to the future. If you spend all of your wages within a week and are broke by the time the next pay day comes around you will always be at the mercy of lady luck. If an unexpected expense occurs it will be a great inconvenience to the broke person. A dental emergency, illness, accident, or a household appliance which we all take for granted breaking down can all occur.

Having some kind of emergency fund to take care of these is the responsible thing to do.

An emergency fund is considered short-term funds; that is, money you may require in the short term, therefore keeping this money in a low risk account is the best option for this type of fund. Investing in high risk funds, also known as growth funds, is not a sensible option. The last thing that you need is for the value of the fund to drop just when you need the money.

Your timeline is the key to finding suitable investments for your money.

Long-term money is funds which are needed after 5 years.

Medium-term money is funds which are needed from 1-5 years.

Short-term money is money which is needed within 12 months.

Discretionary spending money is what is used to feed these three categories. People who have debt do not have any discretionary spending money until that debt is paid off. As the proverb says, “The borrower is a slave to the lender.”

The bottom line is that it is essential that you control your money and not let money control you.

Certainly, the benefits of saving and investing your money cannot be underestimated. Building up your financial portfolio will give you more options in the future, but spending everything limits them. Investing will increase your financial literacy which in turn will help you to make better choices for your money.

About this article: The contents of this article are of the 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 website/blog, or ebook.

Read my other articles on www.robertastewart.com

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Over caution can be costly when investin

Written by R. A. Stewart

“Never invest in the share market which you cannot afford to lose” is a saying that you may have heard a few times but is it good advice?

It all depends on what you are going to use the money for and how soon you need the money.

If the money is in your retirement fund and you are in your twenties or thirties then you will not need the money for another thirty or forty years and even then you may live another thirty or so years so the money won’t be needed for decades. A share market tumble will not make any difference to your current lifestyle. 

You have time on your side to recover from the lows of the markets.

If however, you are saving for a house deposit and require the money in less than five years then being a little more conservative with your money may be the way to go.

The worst thing which can happen is for you to withdraw your money for a house deposit just when  the markets are down and then a month or two later the share markets have rebounded.

It is all about taking a balanced approach.

There is no doubt that many investors are afraid to lose their money so they invest their retirement funds conservatively. The end result will be that they are left short-changed when they reach 65. 

Worst still, they react emotionally when the markets take a dive and shift their funds from balanced to conservative, then when the markets rebound they miss out on the rises which would have seen their retirement fund recover.

It is time not timing which is the key to creating wealth in the share market. Young people have an abundance of time on their side and the young astute investor can use this to their advantage to create their wealth.

Inflation reduces the spending power of your money and just leaving your money in the bank will erode the value of whatever is sitting in that account. If money sitting in the bank is for everyday expenses or an emergency fund then that is fine, but to get ahead one needs to become a long-term investor.

Your risk-profile is the factor which should determine how much risk you should take. Your age is one factor. New Zealand financial advisor, Frances Cook, says, “Subtract your age from 100, and the answer is the percentage of your money which should be in shares.”

I do know of people who have a much larger percentage of shares than Frances Cook’s formula suggests they should have. One elderly couple I know invests in the share market for the dividends which they use to pay for their health insurance.

It is for investors to decide what level of risk they are willing to take and to take responsibility for decisions they make. 

Investors must get over their fear of loss in order in order to make the most of the investment opportunities available. Playing it safe in the matter of finances and life in general will leave you feeling short-changed, when with a few more risks you would have achieved more with your money.

About this article

The contents of this article are of the 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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Stealth Wealth-What it is

Written by R. A. Stewart

“Some People look rich but are actually poor while others look poor, but are rich.”-Proverbs 13:7

Stealth Wealth is a term which I had come across for the first time recently. I had never even heard of it previously so did a bit of research into what it actually meant.

Stealth Wealth is when people who are rich are living low key lives that no one knows they are rich. They may drive a modest car and live in a modest house. These people are likely to have their money in the financial markets and other investments.

At the other extreme, there are people who display their possessions in a way which gives others the impression that they are doing well for themselves. They drive fancy cars, wear expensive clothes, and attend all of the right parties, but they have nothing to show for all of their labours. 

Those in the “Look rich” category often find that their wages are not enough to pay for their flashy lifestyle so they use their credit card. There is a cost to this and that is called interest.

The people who live in such a way as to give others the impression that they are not rich will invest their money in the share market and other income generating investments.

Notice something?

People in the first category are investing money in something which increases in value and this grows their wealth.

Those in the second category spend their money on stuff which loses value and so never get anywhere financially; they are spenders.

Years ago I was working in the hospitality industry and the head chef had bought a car for 20 grand so a colleague told me. I replied, “If that was me, I would have bought the cheapest car and invested the rest of the money.”

Possessions such as an auto-mobile often go beyond the stage when they are for going from A to B, but serve as status symbols to impress others.

People who display their wealth in order to impress others are insecure. The need to appear wealthy steals the joy from their experiences. 

There are lots of rich people but they got there by being a good steward of their resources. Those who are spenders are never satisfied with what they have so they spend more and more on luxuries in order to satisfy their lust for stuff. In order to build up your assets it is necessary to live within your means and invest your savings. 

If there are just two habits which will enable you to prosper it is the habit of saving and the habit of investing.

About this article

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

Read my other articles on www.robertastewart.com

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Active Investor V Passive Investor 

Written by R. A. Stewart

What is the difference?

I was watching a man from Fisher Funds explaining this to a breakfast TV presenter in New Zealand and this is how he explained it.

An active investor is one who picks and chooses stocks which he thinks will out perform the market. 

A passive investor invests in a range of companies; in other words diversifies in order to minimize risk.

He made the point that the tech sector is a growing industry which has taken a greater share of the market which means that diversification is less of a benefit if you want your portfolio in traditional stocks.

There are drawbacks to being an active investor, and they are as I see them:

  1. An active investor makes more transactions and because of this they pay more in transaction fees. That may be an obvious statement, but a factor which is overlooked.
  2. The active investor has to do their research, whereas the passive investor leaves that to their fund manager.
  3. Being an active investors requires constant monitoring of stocks and this all takes time out of your day. Not everyone has that kind of time available to do this.
  4. An active investor must use their own judgement as to what is the right time to sell and this is where some people trip up because emotion often gets in the way of a person’s better judgement. Some people panic when shares drop and sell at a lower price than what they paid for them or hang on to the share for too long in the hope that it will keep rising and the share price starts sliding.

A passive investor buys and holds on to a diversified portfolio, often in ETFs or index funds. These are also called Managed Funds.

These rely on long term growth and usually mirror the market depending on how well the fund is performing.

Passive investing is a lower risk approach to investing because funds are invested in a wide range of industries.

An investor can be both an active investor or a passive investor. He can have a diversified portfolio in his retirement fund which makes him a passive investor and at the same time invest in certain companies on an online investing platform such as Sharesies, Hatch, Robinhood, or Kernel Wealth.

But just because you are investing in individual companies on Sharesies, it does not necessarily mean that you are an active investor. You may have no intention of selling your shares in the foreseeable future so that will make you more of a passive investor than an active one.

About this article

The contents of this article are of the 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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Build your Wealth with Diversification

The Art of Diversification

Written by R. A. Stewart

“Invest your money in many places because you never know what kind of bad luck you are going to have in this world.”-Ecclesiastes 11:1-2

Diversification means that you invest your money in several companies in order to manage your risk. We all know that from time to time a company will collapse, leaving those who invested in them out of pocket. We sometimes hear of cases where one or two investors had their entire life savings invested in such companies and got severely hurt by their loss.

The big mistake these people made was that they placed all of their eggs in one basket. They have only themselves to blame and no one else.

It is important to ask the question of “How will the loss of this money affect my lifestyle? And invest accordingly.

If you are investing for the long term, ten years+ for example then the share market drops should not worry you. These dips are only temporary and you should not view it as a loss but rather treat share market volatility as a fact of life and just get used to it.

Life has its own concerns without being overly concerned with how your portfolio is doing. If you have invested according to your risk profile then there is nothing to be concerned about.

No investment is entirely risk free but in order to increase your wealth then it is necessary to take risks but that does not mean gambling with your money which is speculating on a certain outcome. Investing means taking calculated and sensible risks. 

What is a sensible risk?

Investing in cryptocurrency for your retirement fund is not a sensible risk, it is a reckless one. However, investing in cryptocurrency as a side interest and with only discretionary spending money is fine as long as you understand the risks involved and the loss of your capital in this way is not going to affect your lifestyle.

The same can be said to investing in individual shares as an interest. I have a sharesies account where I drip feed money into individual shares in the share market. I choose one company to invest in per year and drip feed money into this company throughout the year. The share price will go up and down throughout the year and I will get shares at the lower price when they are down.

Investing your retirement fund in this way is considered to be “Placing all of your eggs in the one basket,” and is not recommended, but investing speculatively with your discretionary spending money can provide an added interest and an extra string to your financial bow.

About this article

The contents of this article are of the 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