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Here are 6 ways to make Capital Gains

The article below is of the sole opinion of the writer and is not considered to be financial advice. If you require advice on a financial matter then consult your bank manager or other financial advisor. You may share this article or publish it to your own site or blog.

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 deduction. 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 one 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. The following website provides information for those interested in gold:

 

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 collectables can give you a sense of satisfaction and profit when you intent 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 Banksie 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.

 

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UNDERSTANDING FINANCIAL TERMS

Financial terms

Written by R. A. Stewart

Learning some of the financial jargon and their meaning will help you better understand how the markets work and enable you to make better financial decisions before investing your savings. You should always do your own due diligence in order to reduce your chances of making a costly mistake but at the same time work out a strategy to get the best return on your savings. It is called risk-management and this takes knowledge which is acquired from experience.

Managed Funds

Managed Funds or Mutual Funds as they are also called is an excellent way for ordinary people to get involved in the sharemarket. When you invest your money into a particular fund you are combining your money with other investors who would not otherwise have been able to afford to invest directly in the sharemarket. There are fees with these funds which pay for the services of the fund manager. 

Diversification 

This is when you spread your money around in order to minimize risk rather than placing too many eggs in a few baskets. During the 2008 GFC there were stories of investors who lost their entire life savings when a financial company went under. These people invested all of their money in one company instead of spreading their money around different assets and types of investments which is known as diversification.

Volatility

Volatility refers to the up and down movement of the markets; it is also applicable to investing in gold and crypto currency..

Experienced investors know that the markets can be volatile during periods of uncertainty. Investors need to develop the correct mindset during these times because the markets will take even the most savvy investor on a roller coaster ride.

Risk-profile

This relates to how much risk you are willing to accept before you start to get nervous with your investments. It is easy to be an investor in growth funds when the markets are rising but as experienced investors know, the sharemarket is volatile, therefore you have to invest according to the amount of volatility you are able to tolerate.

Averaging

Averaging is that strategy where you purchase a small batch of shares regularly in stead of in one lump sum. This is possible with internet trading apps. The advantage is that with share values going up and down you at least have bought some shares at the lower price. Then find the average amount you paid for the share, add up the total amount paid for the share and divide that figure by the total number of transactions. This will give you the average amount per share. Averaging can also be used in the purchase of Bitcoin.

Dividend

A dividend is paid out by the companies to its shareholders. The dividend comes out of the profits by the company. Many investors like to reinvest any monies they receive from dividends; others prefer to receive it as income. It all depends on whether one invests for income or long-term capital gains.

Asset

An asset is something which produces an income for you. Examples of an asset are interest bearing accounts, shares, mutual/managed funds, property, etc

Liabilities

A liability is something which costs you money. If you are paying something off it is a liability. Items purchased on HP, a credit card, or finance company are all liabilities because they are costing you money. Astute money-managers have few liabilities because they know that the interest payable on borrowed money is “dead money” because they are not receiving anything tangible for their money.

Capital-Gains

Captain-gains is the increase in value of an investment whether it is shares, mutual/managed funds, property, gold, or cryptocurrency.

ABOUT THIS ARTICLE

It is important to understand the financial terms in order to become more financially sturdy and I have set out the more common ones here. My site www.robertastewart.com has lots of practical financial tips. Feel free to post this article to your blog or website.

www.robertastewart.com

Investing in gold provides a good option for those seeking capital gains, check out the site below:

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

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USING YOUR DISCRETIONARY INCOME

Making the most of your discretionary income

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

But….

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

Rent/rates

Car running expenses

Power

Debt

Groceries etc.

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

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

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

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

The excess to your expenses is called discretionary income.

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

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

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

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

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

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

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

www.robertastewart.com

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

Photo: Franz Josef Glacier

 

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TALKING ABOUT GOLD

Talking about gold
Written by R. A. Stewart
Gold has hit a record price lately and one just wonders how long will this upward trend continue. It is a good idea to keep to the stick to the basic rules of investing. Here are the main ones:
1. When there is a chance for capital gain there is also a chance for capital loss and investing in gold is no exception.
2. Something is only worth what others are prepared to pay for therefore the price you will receive for something whether that be gold, property, or shares is reliant on someone wanting to purchase it at the price you are after.
3. Do not speculate with money you cannot afford to lose but rather use your discretionary spending for that.
4. Diversify your portfolio in order to reduce your risks. In other words do not place all your eggs in the one basket.
5. Have a short term, medium term, and long term strategy for your savings and finances
6. Do your homework before investing in any company or commodity.
Read all you can about the various types of investments in order to make an informed choice.
There are various ways to take advantage on the record gold prices; you can invest in gold mining companies on the sharemarket, purchase gold coins, or invest in gold bullions.
Goldco has lots of information on their site for those interested in investing in gold, check it out below:
https://affiliates.goldco.com/l/1VRW1MU2Q/
www.robertastewart.com

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GOLD PRICE HITS RECORD LEVELS

Gold hits a record high

Gold has hit a record high and one wonders how high it will go before it starts falling but with interest rates so low and coronavirus not going away anytime soon it could reach dazzling heights. It is important to take a step back and not get carried away because the fundamentals of investing still need to be observed.

Whenever there is an opportunity for capital gain there is an opportunity for capital loss therefore never make speculative investments with money you cannot afford to lose but rather, use your discretionary spending for this purpose whether it be money you would have otherwise used for nights out or holidaying.

You do not necessarily have to purchase gold bullions to take advantage of the rising gold price. Investing in gold companies on the sharemarket is one option. You need to do your homework on the company and only invest in one with a proven track record. 

In New Zealand small investors can drip feed money into the sharemarket through Sharesies. This is not the only share trading platform but with Sharesies investors are able to invest money into individual companies.

I think investing in companies which mine gold may not necessarily be a good long term strategy because gold is likely to start failing at some point but nobody knows when that day will come. What is likely to happen is investors will see their gold and invest the money elsewhere. 

Investing in gold coins is another option providing you have a safe place to store it.

You can easily purchase these from ebay or other auction sites.

The beauty of owning gold coins is they can easily be converted back to cash.

Something is only worth what others are prepared to pay for and that is applicable whether it is gold, silver, property, art, or whatever it is.

It pays to do your homework and not invest in something unless you know something about it. Goldco has some informative articles on it’s website, you can find out more here:

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

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COLLECTING GOLD COINS

Collecting Gold Coins  

 

People choose to become involved in various hobbies for several different personal reasons.  Some do it for the pure pleasure and fulfillment they get from the hobby itself (whether collecting, drawing, painting, writing, or some other hobby), while others partake of a specific hobby more readily for profit.  This is the classic divide between people in all aspects of hobby work, including the collection of gold coins.  Why would any individual choose to collect gold coins as a hobby over something more exciting and active?  Again, some people choose their hobbies based on their own ideas of pleasurable activities, while others simply aim to make a solid profit.

 

The reason an individual consider investing in a collection of gold coins can be influenced in several ways from many different sources.  Perhaps someone in this individual’s family – a father or a grandmother or even a favored aunt – collected gold coins throughout this individual’s childhood and simply built interest in the youth or eventually passed on the collection to the young one.  It was simply a matter of deciding whether or not they wanted to add more gold coins to this collection and based their entire decision on sentimentality.

 

Another way a collection of gold coins may have started in reality is through the receipt of a single gift – for a birthday or other special occasion this person received a gold coin from a relative or close friend.  From that small gift, the entire collection of gold coins began as a hobby.  In these cases, the person enjoys the game of hunting down rare gold coins more than actually acquiring them, or maybe he or she simply likes to display an impressive collection.

 

Others may collect gold coins to make a profit.  Some of these gold coins can be worth a great deal of money, especially rare gold coins, and often, such materials actually appreciate over time.  Often, a good collection of gold coins, especially one containing several rare or limited edition gold coins, can be appraised at a high price.

 

Hundreds of thousands of individuals across the world invest billions of dollars and hundreds of thousands of hours in the collection of gold coins, building huge lots that can be worth a great deal of money in the future.

 

Whatever item you are collecting it pays to gain knowledge about it by reading all you can about it because in this way you will be able to see something listed online at below its true value.

 

If investing in gold interests you or it is something you may want to look into then check out the website below:

 

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

 

www.robertastewart.com

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ADDING A GOLDEN STRING TO YOUR FINANCIAL BOW

Adding new strings to your financial bow with discretionary income

Unless one is living from one payday to the next most of us have discretionary income which is basically what is left over after paying our fixed expenses. Rent/rates, power, phone, car running expenses, groceries, insurances, retirement savings are all fixed expenses. We do have some say in how much we are spending in some of these areas such as you can find ways to use less power, be more economical with your grocery shopping, or use the car less often.

What is left over is your discretionary spending. 

This spending money can be used for more speculative investments. If you lose your money then the loss of your money is not going to cause you undue hardship.

So where to invest this money? 

There are plenty of options such as crypto currency, investing in gold & silver, and the futures market.

Investing in gold is one option; there are different paths to take, they are:

(1) Purchasing shares in companies which mine gold

(2) Purchasing gold coins

(3) Investing in gold bullions

It is important to diversify but this may not always be practical for someone with limited means. Fortunately, Sharesies in New Zealand offers investors the chance to buy into the sharemarket with a minimal amount of money. If you are not from New ZEaland it is best for you to take a look at what options are available to you.

If you are going the sharemarket route then do your research on the mining companies and their track record. Also take note of whether the area they mine has met with opposition from environmentalists.

Knowledge is the key and if you do not know much about gold you can sign up here and learn from the experts:

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

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