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Beginners Guide to the share market

You do not have to be rich to get involved in the share market these days with online share market platforms such as Sharesies and Hatch which provide a gateway to novice investors.

If you are from a country other than New Zealand or Australia then Robinhood from the States is a share market platform which you can use.

Here are my tips to follow if you are a complete beginner.

Tip 1: Shares go up and down

The value of your shares will fluctuate; that is the nature of the markets. It is important not to focus on your shares but rather on saving and letting the markets take care of itself because if you are strategic with your investments then falling markets will not scare you. 

Tip 2: Know why you are investing

Have a clear plan on what the money’s for. Is it for your retirement, a mortgage, a vehicle, or as a rainy day fund. 

Tip 3: Invest money you can afford to lose

Money which is invested in the share market should only be money which you can fully afford to lose because of the volatile nature of shares, however, you can choose a conservative funds when investing in managed funds. It all depends on your time frame. If the money is needed in the short term then investing in conservative funds will be your best option. 

Tip 4: Know your risk profile

Your risk profile is the level of risk you are prepared for or are willing to take. If you are young you are able to take more risks because you have more time to recover from financial setbacks.

Tip 5: Not a substitute for kiwisaver

Online investing  platforms such as Robinhood, Sharesies, Hatch and the like should not be a substitute for your retirement fund, in New Zealand that is called Kiwisaver)

Tip 5: Not a get rich scheme

Investing in the share market is a long term game; it is not a get rich quick scheme. Don’t be taken in by the stories of those who have made a share market killing because you never get to hear about the losses and it is likely that people who made that killing will spend years trying to make another killing and lose all their gains.

Tip 6: Patience is a virtue

It is time and not timing which is the key to making money in the share market. Patience investors are rewarded handsomely if they stay onboard rather than jump ship during stormy seas.

Tip 6: Do your homework

It is important to do your homework on the various companies you plan to invest in and not just invest haphazardly. The alternative is to invest in managed funds; the fund manager will choose the companies for you.

Tip 7: Take responsibility

Don’t blame anyone for your mistakes, take responsibility for them and learn from them; that way you will become a better investor.

Tip 8: Get right advice

Listen to the right people. Prior to the Global Financial Crisis, some financial experts were saying “The high interest rates do not reflect the higher risk investors of finance companies are taking on.”

Well guess what happened? A number of them folded.

www.robertastewart.com

Start investing on a shoestring

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

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

Disclaimer: I may receive a small sign up bonus if you join sharesies.

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Your goals and investment strategy

Here is an article I posted on the site three or four years ago. If you are not from New Zealand then Sharesies and kiwisaver may be foreign to you. Sharesies is a share trading platform similar to Robin Hood in the US. Your own country may have its own version of Robin Hood and Sharesies.

Kiwisaver is the New Zealand retirement scheme with its own unique incentives to encourage people to contribute. Your own country will have its own scheme with its incentives.

Your goals and investment strategy

The type of investment you place your savings in all depends on your goals and the time frame for achieving your goals. Investing in low interest accounts is not the best strategy for long term goals while investing in growth funds in the share market is not necessarily the best option for achieving your short term goals. Your investment platform has to be tailored to suit your goals. This table will give you a better idea of what I am going on about.

SHORT TERM GOALS

A short term goal is any goal which can be achieved within a year. This may be for a holiday to the West Coast (if you are from another district) or saving up for a car (if it is cheap enough).

MEDIUM TERM GOALS

A medium term goal takes between a year to 5 years to achieve and can be saving for a house deposit or an overseas trip.

LONG TERM GOALS

A long term goal may be saving for your retirement or paying off your home mortgage.

Lets look at some investment options.

SHORT TERM GOALS.

If you already have the money saved up but won’t be needing the money for 3-6 months then investing in fixed term accounts with one of the high street banks is a good option but if you are actually saving up the money then opening up a special account for this is one but not ther only option. I understand that one is able to drip feed money into bonus bonds and it is easily accessible. Investing in Sharesies may be another option worth taking a look at

MEDIUM TERM GOALS

Investing in Sharesies is a good option I believe because your savings has potential for growth while you are saving but another option is to use an everyday savings account to save and once you have saved a certain amount invest in a 90-day investment with a high street bank. 

It should be pointed out that if you are saving for your first house deposit then joining kiwisaver is a must because you are able to withdraw part of your kiwisaver for a first home deposit provided you have been in the kiwisaver scheme for at least three years.

LONG TERM GOALS

Investing in kiwisaver is your best option here irrespective of the date of your birthday because even if the  retirement age of 65 is just around the corner, you can scale back the type of funds you are in from growth/balanced to more conservative however people may have 20 years or more left after they retire so this may not necessarily suit some people. Once one reaches 65, those in kiwisaver are able to withdraw their retirement savings in one hit or whenever they need it. 

There are so many investment options available to you and you do not have to be rich to get involved but you do need to invest to get rich, one investment I am in favour of is Sharesies;

If you have read my previous posts about explaining Sharesies, you can sign up on the link below;

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

ABOUT THIS ARTICLE

This article is of the opinion and experience of the writer and may not be applicable to your personal circumstances. Seek independent finance advice if you require it. Feel free to use this article as content for your ebook or website/blog.

 

www.robertastewart.com

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YOUR INVESTMENT GOALS

The information in this post is the opinion of the writer and is not considered as financial advice. If you need advice of a financial nature, see your bank manager or other financial advisor.
Taking stock of your investment goals
The sharemarket will be volatile for the duration of the Covid-19 outbreak and even longer, possibly not until 2022 will there likely to be a settling down period when the markets will recover so what should your strategy be?
If you are close to retirement and have seen your funds dwindle, that is up to you. Myself I think it may pay to just ride it out because investing in the markets is a long term game.
To change funds from growth or balanced to conservative funds will be like closing the stable door after the horse has bolted.
The damage has already been done. To be panicked into selling during a bear market is to take a loss and miss out on the gains once the market recovers.
A bear market is a buyer’s market and that is when it is most profitable to purchase shares.
The fund you chose for kiwisaver or mutual funds needs to be the right one.
The three main factors for choosing the right fund for you are;
1. The number of years left before you reach your country’s retirement age.
2. Whether you are going to use your kiwisaver as a deposit for your first home.
3. Your risk tolerance
Another factor is any medical condition which will reduce your chances of reaching the retirement age.be
There are three time frames which need to be considered, namely;
The short term (up to 1 year)
The medium term (within 5 years)
The long term (more than 5 years)
The number of years you have left before being eligible to withdraw your retirement fund is dependant on your age. This for most people is the criteria for choosing your fund type, (growth, balanced, or conservative,) but not necessarily because in New Zealand anyone can use part of their retirement fund as a deposit for their first home at any age. Furthermore, homebuyers are eligible for a grant depending on how long they have been enrolled in kiwisaver which makes joining kiwisaver a no-brainer.
The markets are on a rollercoaster ride, they go up and down and the worst thing which can happen is to save hard for a house deposit only to discover you have less money than what you had actually deposited in kiwisaver by the time you withdraw the money for your house deposit.
This is the reason why those saving for a house deposit in the short to medium term are advised by financial experts to invest in conservative funds.
The flip side to this is the slow returns because if you are saving money during a rising market your savings can quickly grow.
If you have zero tolerance to risk then the conservative funds may be your answer to a good night’s sleep.
Those aged forty and under may be advised to invest in Balanced or Growth Funds because they have time on their side for the markets to recover losses after a crash.
Your fund manager may be in charge of your investment but it is still your responsibility to plan for your future and set your own goals. No one can do it for you. Your goals, age, and risk profile will all determine which fund you should be in.
To receive e-mail updates from me you can sign up below:
https://forms.aweber.com/form/72/892285272.htm
www.robertastewart.com

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COOL HEAD NEEDED DURING THE MARKET SLIDE

Important not to panic during sharemarket downs

The markets will be on a rollercoaster ride for the duration of coronavirus, it is important to keep a cool head and not rush into a decision which could undermine future returns on your investment.

It is all down to your risk tolerance. Those who have invested in more conservative funds may be less affected by the falls in the markets but in the long term lack of exposure to risk will prove costly.

Companies connected to tourism will be most affected by the coronavirus outbreak and these include hotels, airlines, and airports. 

Of these I think airport stocks when they bottom out will be a good buy with Auckland Airport being worth a punt. The airport is not going anywhere anytime.

Some of the markets were down by 3% this week; this sounds a lot but it all depends on how much you have in your retirement fund, (Kiwisaver in NZ). 

Here is a table;

INVESTMENT 3%+ 3%-

$1000 $1030 $970

$5000 $5150 $4850

$10,000 $10,300 $9,700

$20,000 $20,600 $19,400

$30,000 $30,900 $29,100

$40,000 $41,200 $38,800

$50,000 $51,500 $48,500 

The ups and downs of the sharemarket become more noticeable as your retirement fund balance grows. In New Zealand, the government’s contribution of $520 per annum to your kiwisaver will help offset losses as will your employer’s contributions which are 3% of your gross income.

When your balance drops by say 3% then your balance needs to grow by more than 3% to regain those losses.

On the news this week, financial expert Sam Stubbs made the point that in 1918, I think it was, the sharemarket dropped by 11% yet was up by 13% a year later, and it was the same with Sars and 9/11.

If you are investing in individual companies in the market then it will pay to invest in companies least likely to be affected by Coronavirus such as power companies such as Genesis, Mighty River Power, and Meridian Energy. Everyone uses power so they are worth investing in.

Companies to avoid are those connected with the tourist industry but I think Auckland Airport when they bottom out are worth a punt.

Most people do not have the means to invest in individual companies but there is an option for doing just that and it is with sharesies where you are able to dripfeed money into the sharemarket. You can start with just $20 and invest $10 at a time. With Sharesies you can invest in managed funds or individual companies. 

Sharesies is an excellent way for youngsters and the not so young to get some practical knowledge of the markets. There is no substitute for hands on experience when investing.

You can join Sharesies here; https://sharesies.nz/r/377DFM

And my God shall supply all your needs according to his riches in Christ Jesus. Philippians 4:19

This article is the sole opinion of the writer and is not intended as financial advice.

www.robertastewart.com