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Managed Funds Versus Individual Shares

Written by R. A. Stewart

Investors have a choice to invest in managed funds or individual companies but which one is appropriate for your type of situation.

Managed Funds

When you purchase managed funds you have a share in several companies. Your money is combined with other investors and you get a share of any profit. The fund is managed by a fund manager which means that once you have decided where to invest your money it is up to the fund manager to invest on your behalf. The advantage of this is that you can just get on with life and let your fund manager do the work; after all, that is what they are paid to do.

There are still some choices which you have to make such as which fund you are going to invest in.

The decision of which fund to invest in can be summed up in one question, “What is your timeline?”

Are you needing the money in the short-term, medium-term, or long-term?

Short-term is up to three years

Medium-term 3 years to 5 years.

Long-term is more than 5 years.

The three types of funds available are conservative funds, balanced funds, and growth funds.

Conservative funds are the least risky but have less scope for increased returns. Growth funds have the potential to grow your savings but are volatile while balanced funds are a mixture of both.

Individual Companies

Investing in individual companies is much easier these days thanks to all of the online investing platforms available. Sharesies, Hatch, and Kernel Wealth are three in New Zealand which are popular, there are others. If you are outside of New Zealand then you will have them in your own country.

The problem with investing in one or two companies is that unless you have a lot of money to invest it becomes difficult to diversify even using one of these micro platforms. Myself, I just do this for an interest and no other reason. I choose one company per year to invest in and drip-feed money into this company throughout the year. If it falls over, then no harm is done because it is not going to affect my lifestyle one little bit.

Some people invest in individual stocks with the idea of trying to beat the market. That is hard to do , you may have successes from time to time, but it is trying to be more right than wrong which is the problem.

Financial experts advise against trying to beat the market but rather play a numbers game instead by investing in managed funds.

Summary

Choosing between Managed Funds and individual companies is dependant on your goals and timeline. It is your personal circumstances which should be the deciding factor in which is the better option for investing. 

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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Having Different Strings to Your Financial Portfolio

Written by R. A. Stewart

“Have your money in several places because you do not know what kind of bad luck you will have.”-Ecclesiastes: 11:1-2 

Solomon was saying we should all diversify our savings in order to protect us from uncertainty. None of us have any control over the uncertainties of the markets but we do have a say on how to react to what the markets are doing. 

The first thing to do is to diversify your investments in order to lessen the impact of a market meltdown.

If you are just starting out in life and don’t have that much savings this can be applied by investing in managed funds. This is a type of investment where your money is combined with those of others.  You may have a piece of a number of companies. This lessens any impact of any company falling over.

If you were to just save up your money and invest it all in the one company you are putting yourself at a greater risk because the company may have a bad year with its share price losing half of its value.

Investing all of your savings into the one company is called “Placing all of your eggs in the one basket”, it is risky. Sometimes this type of investing pays off but when it does not the results can be catastrophic for those who lost their life savings.

You sometimes hear about the success stories of so-called gurus but not the Mum and Dad investors who tried to do the same thing as the rich gurus and lost.

It is important to invest according to your own personal circumstances and your own goals and not be persuaded by anyone else to invest in this and that.

Whenever there is a chance for a capital gain there is also a chance for a capital loss, therefore your strategy has to allow for the possibility for a capital loss. If you are saving for a car and expect to withdraw the money within 2 years you certainly would not invest in growth funds which are high risk, high return because you may find that your balance has dropped significantly just when it is time to withdraw the money. Growth funds are a more appropriate investment for your retirement fund when you are young and have decades ahead of you.

Your financial portfolio should be a mixture of different types of investments which reflect the goals and purposes of each fund. This could be your emergency fund, saving for a house deposit, car, or overseas fund, retirement fund etc. 

As Ecclesiastes says, “Invest in different places, you never know what kind of bad luck you may have.”

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 a blog/website or ebook.

Read my other articles on www.robertastewart.com

Tired of seeing your bank charge you $5-10 every time you withdraw cash abroad PLUS that hidden foreign transaction fee? 🤯 That’s money that should be buying you a gelato, a beer, or a souvenir. Wise gets you the real mid-market exchange rate with only tiny, transparent conversion fees from 0.42%. Stop funding your bank’s next vacation. Fund yours. 👉 Link in bio to get your Wise card! 

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Key to Investing Is….

Making a start. You do not have to be rich to invest but you do have to invest to be rich. 

Most people can save money but becoming an investor requires diligence and a certain amount of common sense which a lot of savers do not possess. It is for this reason that a retirement savings scheme where a small percentage of your gross income is paid into the scheme is an excellent option. The money is taking out of your wages that it is virtually unnoticed. It is with fund managers who invest it on your behalf. Using their knowledge. Another advantage is that your money is diversified among a number of companies. This reduces your risk. 

Having money set aside for the sole purpose of your retirement has to be part of your financial plan and is the responsibility of each individual. As I said at the beginning, the key to investing is making a start.

Experience is your best teacher. Doing your homework and reading about all of the different kinds of options available to you when investing is all very well but at some point you have to get down to the nitty gritty and make decisions on where to invest your money. It is all about backing your judgment. 

There is no excuse for being financially illiterate with so many books on financial matters and you don’t have to spend money to have access to them as you will find them at your local library.

Having a goal is important because you will just fritter your money away on stuff which is meaningless if you do not know where you are going. Having goals requires vision. It is making choices today which have an impact on your future. If you do not save and invest then your future or aspects of it will be in the hands of others.

There are consequences for not making provision for your future. One is that if you are purchasing a car and you have no savings then you are at the mercy of finance companies. They are happy to lend you money to purchase a car. 

When you borrow money to purchase things such as a car or household appliances you are accumulating liabilities. Anything that costs you money is a liability.

You do not have to be saving for anything in particular to start investing. Building up a portfolio of shares to give you an interest in the markets is something Mum and Dad investors like to do. In this day and age this can be done easily with so many online share market platforms available.

In this age starting takes more effort than continuing. People are so set in their ways that they  find it hard to change-moving from thinking about investing or saving to actually doing it.

Waiting is costly!

Many people are waiting till the time is right before investing. They wait for their debts to be paid off, they wait for a promotion, wait for the share market to drop or wait for some circumstances in their life to change. All of this waiting means that they are not taking advantage of compounded interest which can snowball their wealth.

Not only that; they are missing out on the experience which comes from getting involved in the markets.

Taking that first step whether it be setting up an emergency fund, a brokerage account, or a retirement fund shifts your mindset from spender to saver, from saver to investor.

The best time to plant a tree was twenty years ago and the second best time was yesterday. 

About this article

This article is not considered as financial advice, 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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Mistakes made by investors

 

Written by R. A. Stewart

Everyone makes mistakes, it is a part of learning. Those who claim to have never made any mistakes are living in self-deception. As far as money and investing is concerned, learning how to invest according to your goals and personal circumstances requires experience and that will be accompanied by mistakes along the way. As they say, “Experience is your best teacher.”

Here are some of the most common mistakes made by investors.

  1. Investing too conservatively

Investing too conservatively will leave you short-changed in the long run if there are decades between you and retirement. Long-term investors who are too conservative are leaving thousands of dollars on the table. This does not mean that you should be reckless and invest your life savings in something risky but invest for growth.

  1. Investing in the wrong fund.

If you have a retirement fund or mutual funds then investing according to your goals is important. If you have a rainy day account this should be invested in something safe such as with a high street bank because the money is available as needed and the last thing you want is to invest your rainy day fund in something volatile such as shares and  just when you need the money your balance has gone down and you will have less money in your account than you thought you had.

 

  1. Not diversifying

Placing all of your eggs in one basket is just asking for trouble. You don’t know what is going to happen in the future. Investing your money in several places will cushion you from the effects of a downturn in the economy because not all industries are affected in the same way. 

  1. Unwillingness to get financially educated

Ignorance can be very costly. If you are not even willing to learn how to manage your own money and investing then you have only yourself to blame if you end up in need. There is only one person who can change your situation and that is the person you see in the mirror.

  1. Lack of Planning

Not knowing where you are going will lead you to nowhere. Having goals for you and your finances gives your work and your life a purpose. It gives meaning to everything you do. It is the “Why” to everything you do.

Everyone has choices but these choices have consequences and it is up to you to make choices which are beneficial to you and your family if you have one. Taking responsibility for your choices and mistakes shows that you are a mature person. Immature people blame others for their mistakes and are quick to find a scapegoat for their misfortune.

About this article

This article is of the opinion and experience of the writer and is not financial advice.

You may use this article as content for your blog or ebook.

Read my other articles on www.robertastewart.com

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The Magic Power of Compounding

 

Written by R. A. Stewart

If you have any kind of financial knowledge you will know that the process of investing your money for years, sometimes decades and leaving your interest or dividends accumulate so that you end up earning interest off your interest is known as compounding.

Your investment starts to snowball once you have built up a decent portfolio. Using the process of compounding will enable you to achieve your goals faster.

Compounding also helps you to beat inflation which is a thorn in the side of those who are trying to get ahead in life. 

Investors who choose to have their interest or dividends paid into their bank account rather than have them added to their investment will find that their original investment will lose it’s purchasing power thanks to inflation. 

Your investing timeline is a big factor and the purpose of your investment.

If you are retired then you may prefer to have dividends paid into your bank account to help pay the bills and many do just that. The young ones usually let the income from their investments accumulate. This is common in retirement and mutual funds.

When you are saving for something then consider whether they are short-term, medium-term, or long-term goals. This matters because choosing the wrong type of investment for your timeline can affect how much you will end up with when it comes the time to cash in your investment.

For example it is not appropriate to invest your emergency fund in a growth fund due to it’s volatile nature because what is liable to happen is that just when you need the money the markets are down and there is less money available in your emergency fund than you thought there was.

At the other extreme, it is foolish to just leave your retirement fund in an ordinary savings account where you are paid minimal interest because inflation will erode the spending power of your money. 

Here is a break-down of the timelines of Short-term, medium-term, and long-term goals.

Short-term goals are within 12 months.

Medium-term goals are 1-5 years.

Long-term goals are over 5 years.

Getting into the habit of saving and investing will put you into a good position to withstand the financial shocks which life throws at you. This could be illness, job loss, family emergency, car breakdown, or anything else.

It takes vision to make some kind of provision for your future because you are preparing yourself for an event which may or may not happen. 

Then there are events which most people planned for such as buying a new car, further education,  saving for a house deposit, marriage, family, overseas trip, and retirement. People who have common-sense will make provision for events in their life which they expect to happen.

Investing your money for compound interest will help you to achieve your money goals sooner rather than having your interest or dividends paid to your bank account to spend. But it all depends on your personal circumstances.

About this article

This article is not financial advice 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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The Rule of 72: The Ultimate Mental Math Trick to Double Your Money

The Rule of 72

Written  by R. A. Stewart

When investing your money there is a formula for calculating how long it will take your money to double. this is known as the Rule of 72. It is a quick, useful mental math shortcut used to estimate how long it will take an investment to double in value at a fixed annual rate of return.

Here is how it works:

The Formula

Divide 72 by the rate of interest or the expected rate of return per annum.

Note: When using this formula, you use the percentage as a whole number, not a decimal. For example, for a 6% return, you use $6, not $0.06

How It Works (Examples)

  • At a 6% return:
    72 divide by 6 = 12
    Your money will take approximately 12 years to double.
  • At an 8% return:
    72 divide by 8 = 9
    Your money will take approximately 9 years to double.
  • At a 12% return:
    72 divide by 12 = 6
    Your money will take approximately 6 years to double.

Reversing the Formula

You can also flip the formula to find the interest rate required to double your money within a specific time frame:

72 divide by 3% = 24

If you want your money to double in 24 years, you need a 3% return

72 divide by 7.2% = 10

If you want your money to double in 10 years, you need a 7.2% return

Why 72?

The number 72 is used because it has many low divisors ($2, $3, $4, $6, $8, $9, $12), making the mental math incredibly easy.

Mathematically, the exact number for natural log-based compounding is closer to $69.3, but $72 provides a remarkably accurate approximation for typical investment returns (between 5% and 12%) without needing a financial calculator.

Here is an example of how your money can double using the Rule of 72 Formula.

Expected return per annum (per year) is 8%

Maria has $1,000 to invest and she has decided to invest it in kiwisaver at an expected return of 8%.. Here is a breakdown of  how this initial investment will grow.

Age Investment Age Total

18 $1,000 27 $2,000

27 $2,000 36 $4,000

36 $4,000 45 $8,000

45 $8,000 54 $16,000

54 $16,000 63 $32,000

63 $32,000 72 $64,000

When an investment is left to compound it means that the interest or dividends are added to the  original investment which means that you are earning interest fro the interest.

This is how kiwisaver fortunes are being made.

At the other extreme, Jasmine invests $1,000 at the age of 18 but instead of just leaving the interest with her $1,000 investment she gets her interest or dividends paid into her bank account to spend. The spending power of her original investment of  $1,000 has been eroded by inflation over the years. This means that her $1,000 if she were to spend it when she retires would not go as far as her original $1,000.

Example

Age Investment Age

18 $1,000 27 $1,000

27 $1,000 36 $1,000

36 $1,000 45 $1,000

54 $1,000 63 $1,000

63 $1,000 72 $1,000

Retirees who have built up a good nest egg sometimes like to have their interest and dividends paid to them to help with day to day living costs but this is not suitable for the young ones who seek to build their wealth over time.

About this Article

The information in this article 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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Mistakes with Money

Written by R. A. Stewart

1 They make poor life choices

The difference between the rich and the poor is because their choices in life are different. There is a stark difference between what a rich person and a poor person does with their discretionary spending money. All of those satellite dishes on council estates tell a tale. A rich person will find ways to invest their discretionary dollar so that it multiplies while a poor person will spend all that they have and more when you consider the consumer debt that they take on. It is also a fact that the poor tend to have more children and having kids does not come cheap, so this further compounds their vulnerable financial position.

2 They do not save 

People in a poor financial state do not save money. They fritter away their money with no thought for the future. Their financial situation is made worse because of their poor lifestyle choices. They borrow for stuff which is not essential to everyday living and spend money on things of no lasting value and this leaves them with nothing to show for their labors.

3 They do not invest

Wealth does not increase when money is not invested. Instead it loses its value due to the effects of inflation. Investing gives you a financial education and this leads to better decision making when it comes to money matters. This in turn leads to better financial outcomes for the future.

4 They do not take risks with their money

Investing involves taking some risks with your money but this does not mean speculating which is really just gambling on some favourable outcome going in your favour. It is having a strategy of investing which enables you to make the most of what you have

5 They do not get financially literate

Lack of financial literacy is the number one reason why so many people are broke. Lack of ambition to rise above mediocrity is the main reason and there is little hope for the individual who lacks the will to improve their financial situation. I know that you are not one of those people otherwise you would not be reading this.

  1. They hang out with the wrong people

People tend to associate with like-minded people. You are the average of the person you spend most of your time with. You will learn money attitudes from whoever you spend most of your time with. 

  1. They have a poor attitude

Having a poor attitude to money is one sure way to live in mediocrity all of your life. When you receive a windfall do you invest it or spend it? Most people do the latter then accuse those who make the most of what they have as stingy. 

Having the will to improve your finances is one thing but putting it all into action is another. Reading books and investing some of your discretionary dollars is a starting point. It has never been easier for the person with limited means to invest in the share market with so many online investing plat forms. It is just a matter of having goals which align with your values. Having something to save for is what provides the motivation to save.

About this article

You may use this article as content for your website, blog, or ebook.

Read my other articles on www.robertastewart.com

Working in your chosen field

You may not have the talent or inclination to be an international sportsperson but you can be an asset in your chosen field and that does not mean that you have to be something out of the ordinary to become a valued member of society. A person who works at an entry level job can do so with such a good attitude that their diligence will not go unnoticed by their employers.

You may not particularly like your job and have any control over what happens at work but your attitude is something you can control. An employer with a bad attitude will take that bad attitude with them wherever they go. 

If you enjoyed this article then this ebook may interest you:

 

How to Enjoy Your Job

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Fear of Loss will kill your chances of prosperity

Fear of Loss will hinder chances of prosperity

The fear of losing money will cause people to play it safe by not stepping outside their comfort-zone and not investing their money for greater returns. 

Leaving your money in an ordinary savings account will mean that inflation will erode the value of your money yet that is exactly what a lot of people do. They are afraid to take risks.

Some of this fear comes from those who had experienced the crash of 1987, better known as “Black Monday” when portfolios were hit hard. Some people lost their life-savings and more tragically, a lot of the money which went down the drain was borrowed money.

In these situations, shares were worth less than the money borrowed to purchase them.

There are risks which are worth taking and risks not worth taking. It takes discernment to tell the difference.

I remember once (about 2001) I bought shares in Air New Zealand and they almost went bust, well they would have if the government did not bail them out. The shares dropped to a low of fourteen cents a share. I bought my shares in the company at around $2 a share.

This was the last time I bought shares in an airline. It was an expensive lesson. 

I have known some people who never invest their money for fear of loss; they cannot handle the volatility of watching their balances go up and down yet they have no problem with buying their weekly lottery tickets. If they had deposited that same money into their kiwisaver then these people would have a fortune waiting for them once they reach the age of 65.

“You make your choices and your choices make you.”-Jim Addison, Scottish Pastor

It is all about choices.

The choices you make today will determine which choices you are able to make in the future.

If you have been sensible and joined a retirement scheme and contributed to it all of your life then this choice will give you more options in your later years.

Ask yourself these questions, “What action can I take today which my future self will thank me for?”

There will not be a single person who reaches the age of 65 or whatever the retirement age is in your country, who will regret ever joining  and contributing to a retirement fund.

It is everyone’s responsibility to get a financial education. This will help you to make right choices for your money. Apply what you have learned which are applicable to your personal circumstances.

Getting over your fear of loss will enable you to grow your wealth rather than just leaving it in the bank where inflation will steal the purchasing power of your money.

About this article

You may use this article as content for your blog, website, or ebook.

The contents of this article may not be applicable to your personal circumstances, therefore discretion is advised.

Read my other articles at www.robertastewart.com

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What are you Saving For?

What are you Saving For?

Written by R. A. Stewart

The ASB television ad asks the question, “What are you saving for?”

When you know the answer to that question it becomes your goal. It leads to another question, “Where to invest your money until it is needed.”

In the TV ad, a boy was saving up to buy his favourite girl a gift. 

Developing the habit of saving for something specific from a young age is a good habit to get into. It teaches young people to be smart and strategic with their money.

As we get older, the things we are saving money for are in the hundreds, then thousands of dollars. As they say, “The difference between men and boys is the price of their toys.”

Choosing the appropriate kind of investment for your savings goal is important and the number one factor to consider is your timeline.

If you are saving for something long-term then just leaving your money in an ordinary savings account is not a smart way to save because inflation will erode the value of your money. 

Long-term is 5 years and more.

If you are saving for the medium term then you can be a little more conservative with your investing because you don’t want to invest in something volatile and find that there is a market meltdown just when you need that money.

Medium-term is between 1-5 years.

If you are saving for the short-term then you may need that money within the next twelve months then you can take a no-risk approach and just leave it in an ordinary savings account.

Short-term is up to 12 months.

Here are some long-term, medium-term, and short-term goals which you may be saving for.

Long-term

Retirement fund (Kiwisaver in New Zealand)

Education fund

Home deposit

Medium-term

Saving for a car

Overseas holiday

Marriage and kids

Short-term

Your emergency fund

Money set aside for rates, power, and other household utilities.

Once you have classified which category each fund belongs to it is then a matter of choosing the correct investment for each fund.

In managed funds there are three categories of investment, growth funds, balanced funds, and conservative funds.

Growth funds are suitable for long-term investments because they can be volatile but at the same time have the potential to grow your wealth. Young people have more time on their side to recover from market crashes, therefore, growth funds are appropriate for them, but that does not mean that retired people should not invest in growth funds as long as you are aware of the risks and that a market fall will not affect your lifestyle.

Balanced Funds are suitable for medium-term investing. They are not as volatile as growth funds but you are still exposed to the share-market which means your savings have the potential to grow but not at the same rate as growth funds.

Conservative Funds are less risky. You have a little exposure to the share market but not as much as with balanced and growth funds. Conservative Funds are more suited to short-term investing.

An ordinary savings account is appropriate for money set aside for rates and other house-hold expenses. Making the most of your discretionary spending money and using it for your savings goals can help you achieve them faster. A person who is poor with their money will fritter everything they have and then borrow for things they need.

It is important to avoid becoming fixated with your balances in whichever funds you have chosen. Balances will bounce up and down. That is the nature of the markets. 

There are plenty of opportunities to invest in this day and age with so many online investing platforms available in New Zealand. Sharesies, Hatch, and Kernel Wealth are three which I personally use. If you are from the US then Robinhood is a well-known one over there.

About this article

The views expressed 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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Breaking into your Retirement Savings Early can be costly

Breaking into your Retirement Savings Early can be costly

Written by R. A. Stewart

New Zealand’s retirement scheme is called Kiwisaver. There is one thing which makes this scheme unique to retirement schemes of other countries and it is this:

There are circumstances when people can access their money prior to reaching their retirement age, 65 in New Zealand. People can access their money early for any of the following reasons:

  1. Terminal illness
  2. Going overseas permanently
  3. Purchasing their first home.
  4. Hardship.

Numbers 1 and 2 are quite understandable. Number 3 is that if you are purchasing your first home you may be able to use part of your kiwisaver for a house deposit.

Reason number 4 is the most common reason for premature kiwisaver withdrawals. In 2025 58,000 people withdrew money from their kiwisaver for hardship reasons. 

Breaking into your Kiwisaver early is not easy. You have to prove undue hardship, something which 58,000 people have managed to do. 

It is the fund manager’s supervisor who makes the decision to release your funds. They still have to follow a set of strict guidelines and a lot of people will have their application to withdraw early declined as a result.

Some people will see their Kiwisaver balance and think, “You can’t take it all with you, I can do a lot with that money,”

Kiwisaver is earmarked for your retirement or for your first home purchase and should not be touched otherwise you will be paying for it later on down the track.

The whole point of kiwisaver and any other retirement scheme is that you are saving money for your retirement and do not withdraw and keep contributing. 

Consistent long-term savings work well thanks to the magic of compound interest. 

Any break in savings will interfere with this process. 

With compound interest you earn interest on the interest and this helps your savings to grow faster. 

At retirement there can be a big pot of money waiting for you thanks to compound interest which is a friend of the long-term saver.

Making right choices

It is important to make the right choices when making important financial decisions, whether that is entering into a new relationship, purchasing a car, taking out a loan, or making major home improvements. The pros and cons need to be explored thoroughly and not to be rushed into.

All of these major decisions will have consequences, which will eventually lead to an outcome. 

One big mistake is to make major decisions based on today’s circumstances as if today’s circumstances will remain the same forever. Investing some if not all of your discretionary spending money in a share market fund other than kiwisaver will improve your financial know-how. There are several online share-market investing platforms available to begin your investing portfolio if you have not already started one. It is just a matter of being consistent with your investing and letting compounding interest do its work. 

About this article

The contents of 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