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How to Start a Sharemarket portfolio from Scratch…

How to Start a Share market portfolio from Scratch…

Even if you have never invested a dollar

Written by R. A. Stewart

You are a beginner to investing and want to know how to get involved in the share market and don’t have much money to invest.

My advice is firstly to ensure you have set up a pension scheme with your employer. This will help make money retirement easier as far as finances goes. Anything else you invest should be treated as strings to your financial bow.

Here is my advice to investing novices. 

There are two ways for you to drip-feed your money into the share market. They are:

  1. To join a managed fund type of investment. This is a fund where your money is combined with the money of other investors. The fund manager invests in the share market on your behalf. This minimizes risk because funds invested in this way are spread across different asset classes, something which is unobtainable for most investors unless you are already financially well off.
  2. To sign up with an online investing site where you are able to drip-feed money into the share market. Do your research into the various platforms. Popular ones are robinhood in the USA and sharesies in Australasia. 

Two pieces of advice which financial experts will tell you is “Do your research and diversify.”

It helps if you are familiar with the industries and companies you are investing with. I use the online platform “Sharesies” which is based in New Zealand. My strategy is to choose one company per year and drip-feed money throughout the year into this one company. I chose New Zealand based companies, all of them household names. I have already decided the following year’s company to invest in by Christmas.

I have invested in a range of companies such as Genesis Energy, Spark, Fontierra, Fletcher Building, PGG Wrightsons, and Contact Energy. All are well known brands.

It is important not to get too greedy. The internet is full of stories of people who got rich investing in this or that and made a killing. This has to be treated like a grain of salt because for everyone like that, there are countless others who tried the same thing and failed.

Greed often gets the better of people and the one who made the killing will often end up giving it all back.

The share market rewards consistency and persistence. Make sure you are in the right fund for your risk profile and your goals. If you are drip-feeding money into the share market like I am doing then it shouldn’t matter how the markets are performing. Just keep investing and let time be your friend. After all, investing with an online app is just another string to my financial bow.

You should invest in the share market with money that you cannot afford to lose is a piece of advice I have heard time and again. The main question before you invest in something is, “How will the loss of this money affect my lifestyle?” 

I would not recommend that you invest in growth funds if you need the money within a year or two because the markets may drop just as you are about to withdraw the money.

It is important to be sensible and strategic with your investing and just as important to keep a cool head otherwise you may end up with burnt fingers.

About this article

The opinions expressed in 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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The Prodigal Son and its Money lessons

The Prodigal Son and its Money lessons

Written by R. A. Stewart

The parable of the prodigal son may have been first told over two thousand years ago but its lessons are timeless and are worth noting. In this parable a young man asks his father for his inheritance while his father was still alive. The Father then divides his estate between his two sons, and then the younger son,the one who asked for his inheritance gathers all of his things and goes to a faraway land where he fritters away his inheritance on loose living.

During this time the younger son had more money than he ever had in his life but was not responsible or mature enough to handle all of that money. In fact he was just a baby with too much money.

As so happens when young people get a lot of money, he became arrogant and displayed his wealth with his generosity. 

He had lots of friends when he had all of this money but they were not true friends as we will discover later on in this story.

We sometimes hear stories of people who won the lottery, then were broke a few years down the track. It is important for people to learn how to handle their money from a young age. This is called, “Financial literacy.”

Learning to be an investor is part of being financially literate. Some people are good at saving but they save to spend, not to invest.

Back to the prodigal son.

When one is living beyond their means the result is debt and with interest repayments on top of that financial disaster looms. The prodigal son, the younger of his father’s two sons, spent all that he was given and had nothing coming in so that it was only a matter of time before he was left with nothing.

The parable puts it this way, “There was a famine in the land”

This means that he was living in poverty. The money was all gone so what did he do?

He got himself a job working among the pigs. He wished he could eat what the pigs ate but no one gave him anything.

Strange; he had lots of friends when he had lots of money but as soon as he needed help, no one would help him. 

You will only find out who your real friends are once you hit rock bottom.

Next thing, something happened inside the mind of this lad because he came to his senses. In other words, The Penny Dropped.

He figured out in his own mind that if he returned home then he would be better off than his current circumstances. 

The main lesson from this story is that despite all of the stuff offered by the world system, it only leads to emptiness. There are things which he will never get back and that is time that he never spent with his family. His behaviour was a stain on his reputation. There are some things which money cannot buy; a good reputation and time with his family. It is all very well, going out and exploring new opportunities and working hard to make a life, but these things need to be kept in its proper perspective.

www.robertastewart.com

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How to set Money Priorities (And stick to them

Written by R. A. Stewart

Being strategic with your money will enable you to make the most of what you have and that means managing your money well; it also means prioritizing what you are going to do with your money.

Having clearly defined goals will enable you to do this but it takes a fair bit of discipline to stick to your plan.

If you are saving for a car then it means giving up stuff which does not add any value to your life. There are worse ways in which you can spend your discretionary dollar than on a vehicle. If you spend it on clubbing every weekend, then you will not have anything to show for the money you have frittered away. At least buying a car will add to your lifestyle.

Keeping pets can be very expensive and can cramp your lifestyle. The cost is not the only issue you have to deal with; if you are away on holiday then there is the issue of who is going to look after your cat or dog.

Then there are vet bills. Some folks are so attached to their cat or dog that they are prepared to spend $1,000 or more on vet bills. This is utter madness and can undermine a person’s financial well-being.

The questions which need to be asked are:

Is this purchase really necessary?

Will this purchase help me to achieve my financial goals?

Is this the best use of my money?

It is worth pointing out that there are some factors which affect your priorities. Some of them are your age, family responsibilities, your health, and your goals.

If you are aged in your sixties, then you are not going to have goals with a thirty-year timeline.

Another thing which should be mentioned is that whatever you are saving for should not be at the expense of your retirement fund. If you get into the habit of putting off retirement contributions after you have saved for whatever it is you are saving for then it will cost you when that time comes and it will surely do. 

Investing helps build your financial literacy. If you are not getting involved in the share market, then you are not gaining investing experience which will help you make better decisions in the future. It is better to make mistakes when you are young and with no commitments because your lifestyle will not be impacted. Not so when you are older when you may have your own family or other commitments.

We all have a choice of how to use our discretionary spending money and by setting goals on where your money is going you will have something to show for your money. It is all matter of prioritising you’re spending.

About this article

The opinions expressed in 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 at www.robertastewart.com

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Don’t just hoard your money-put it to work

Written by R. A. Stewart

Saving money is a good habit to get into; it will put you in a better position to thwart some of the unforeseen setbacks which life has in store for us. It will also mean that you are able to pay for those major items in life which will crop up such as, a car, wedding, kids,or  retirement. This all requires vision. Planning for those things which are unseen but will likely occur in the future.

A person with no vision will spend their money without any thought for the future; they live for today as though tomorrow does not exist.

Saving money is one thing but investing is another thing altogether. Investing your money can multiply your wealth and help you to achieve your goals faster.

Investing needs to be strategic. Most importantly you need to know whether what you are saving for is short-term, medium-term, or long-term.

Your rainy day fund is considered short-term because you could need the money anytime, whether that be for car repairs, insurance, dental or medical bills.

Saving for a car can be considered short or medium term depending on how long you have given yourself before you are buying a car. 

Your retirement fund and saving for a house deposit are considered to be long-term savings goals.

Here is a breakdown of Short-term, medium-term, and long-term goals.

Short term is under one year

Medium-term is one-five years

Long-term is more than five years.

This determines your risk profile but you can fall into more than one category depending on what your savings goals are.

Your rainy day account is money which should be invested conservatively such in an ordinary savings account or a conservative fund in say sharesies or robinhood.

You’re saving for an overseas trip or car within five years in the medium term so you could consider having that money in a conservative or balanced fund.

Your retirement fund is considered long-term so that money could be in a growth fund if you can stomach the volatility of the markets.

As an investor you can fall into all three categories.

There is another category which I will include here and that is discretionary money, but if you are planning to save for something special then you can simply redirect your discretionary spending money into whatever you are saving for.

What you spend your money on is what takes priority in your life. It should not be at the expense of your future plans. If you are spending all of your discretionary money on your hobbies but have nothing to show for all of the money you have received from whatever source your income comes from then there is a problem. 

It all boils down to choice and how you manage your money. It is not how much money you make which determines your financial outcome but what you do with what you make.

With the right financial strategy in place you can weather some financial storms which may come along. As for investing, if you choose the correct investments for your risk profile then what the markets are doing will not be an issue. Don’t let the possibility of loss scare you off investing. You need to be an investor if you want to grow your wealth.

About this article

The opinions expressed in this article are 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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Don’t make money your first goal

Don’t make money your first goal

Written by R. A. Stewart

To live a purposeful life one has to do something meaningful and that usually involves some kind of activity which does not involve getting paid or which costs you money.

Of course your first responsibility is your commitments. Take care of those but also spend some time doing whatever you enjoy doing, then you will have something to look forward to when you get home from work.

This is particularly so if you are in a job you hate.

It is soul-destroying when all you have to look forward to is your paycheck every week or month, and once that is gone you go through the same process over and over again.

There are some ways of getting out of a rut and one of these is to up skill but even that does not work for some people. I have known people to take courses in various subjects in order to improve their chances of getting a higher paying job and they still never seem to rise above working in a job which pays the minimum wage.

Paying for higher education with a student loan can pay off but if you are going to take this route then you had better make sure it is something you want to do otherwise it will be a waste of time and money. The key thing is to know how you are going to use this education. It will be a good idea to make a list of the jobs which you are available with the qualifications you are seeking to acquire.

It is important to do things for the right reasons and not try to fit in with what others are doing.

I have known people who have gone into study simply because others are doing or to impress others because they appear smart. Usually there is no thought of what they are going to do with their newly acquired skills, that is, if they have passed their exams.

Getting a higher paying job may not be all that it is cracked up to be if you weigh up all of the pros and cons. There are some things to consider.

  1. Will the increased income move you up to a higher tax bracket?
  2. Will you be spending less time with your family?
  3. Will you have more responsibility?
  4. Will you have to do more travelling as part of the job?

The bottom line is the extra stress which goes with the position may not be worth it and you may not be all that much better off financially anyway.

Life has to be lived in a balanced way in order for it to be meaningful. The bills have to be paid, but if you are able to turn a hobby into an income stream then you are living the dream. An ambition has to involve more than just earning money to buy stuff. Experiences with others cannot be purchased with money. Our family’s tradition was our Sunday afternoon game of cricket and it all began with just a cricket bat. We used boxes for wickets to start with then we cut up some saplings to use for wickets.

It just goes to show that you don’t need much money to create lifelong memories.

About this article

This article is of the opinion and experience 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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Who do you take Money advice from?

Who do you take Money advice from?

Written by R. A. Stewart

Everyone has some form of advice on what you should do with your money. From co-workers and family members to bloggers and those who are qualified to provide financial advice. A lot of people will have some form of opinion on what you should do with your money. So much so that it pays to not speak about your financial affairs with anyone; not that it is any of their business.

There are some red flags to note from any of these so-called financial experts. These red flags are just as applicable to the man in the street as they are to a qualified financial advisor.

Red Flag number one: The advisor has no money

I knew someone who turned a couple of hundred dollars into $6,000, then $10,000, then $20,000, and more. In the early stages when he had $6,000, his colleagues suggested to him that he should get a deposit for a new car with that money. I said “That is the stupidest advice you could ever get because not only will you end up with nothing but you will have a debt.” 

He ignored his colleague’s advice.

I told him that he should at least deposit at least $1040 in his Kiwisaver in order to get the $520 government money in July. I don’t know if he followed that advice.

Red Flag number two: They do not know anything your your personal circumstances

If you receive financial advice from someone who does not know a thing about your financial situation then treat that advice with some kind of scepticism. The advice and acting on it must be based on your personal circumstances and your goals for the future. Your age and health are other factors which have to be taken into account. It is your responsibility to make it known to a financial advisor what your future plans are but that does not mean that you should just reveal all to a random cold caller. Use your discretion and common sense when discussing anything with others. 

Red Flag number three: They advise you to invest your life savings in one company

This is a major red flag! Diversification spreads your risk but plunging all of your money in the one company can lead to financial ruin and affect your lifestyle big time. It may be true that there are some people who made a killing by plunging but it is equally true that a lot of people lost everything they invested. The only reason why a paid financial advisor would tell you to invest all of your money in the one company is that they are more interested in their commission rather than your financial well-being.

Red Flag number four: You are advised to invest in cryptocurrency

This is a major red flag. No one should ever advise you to invest in any kind of cryptocurrency. This is a high risk speculation rather than an investment. Only discretionary spending money should be used for purchasing Bitcoin. If you are young and have no commitments then buying Bitcoin will provide you with a bit of excitement, but it is certainly no substitute for your retirement fund.

Red Flag number five: The advice is unsolicited

If you receive a cold call from someone claiming to be a financial advisor then hang up or delete the email. Tell them that you already have an advisor. Whatever you do, don’t engage with them. If you have responded to anything they have said, then say, “Let me talk to my financial advisor first.”

A typical scammer does not want you to talk to anyone else about their so-called opportunity.

Learn to spot the terminology these scammers use in their correspondence and it will help you to avoid becoming their next victim.

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

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How to respond to financial setbacks

 

Written by R.A.Stewart

In 2008 during the Global Financial Crisis, a company I had money invested in went bust. I had close to 7 grand invested in it but my initial investment was 5k. The interest rate the company offered investors was higher than what you would receive if investing for a fixed term with the banks. 

I had smaller amounts invested in other companies which went bust.

The company had assets in property and I thought that at least they had assets which could cover the loan if they ever went bust. Problem was, their assets were worth less than their liabilities.

It reminds me of the 1987 sharemarket crash, also known as “Black Monday” when investors borrowed money using the value of their shares as collateral and as the value of shares increased investors were able to borrow even more. 

That is until the crash when the value of their portfolio was worth less than the money owing on them.

A guy I worked with told me that he had mortgaged his house to purchase shares and was left with a debt which at that time will take years to pay off.

There are several ways in which people respond to financial setbacks such as those that have been described. Here are three:

  1. Stop investing in the markets

Some people who got their fingers burnt during Black Monday, stopped investing at all and just left their money in an ordinary savings account. These people may have avoided future share market shocks but they have also missed out on the market rises. Savings which are just left in a personal bank account will lose money if it is left there for any length of time when you consider the effect of inflation and taxation.

  1. Blame Others

During the Global Financial Crisis (GFC), a lot of investors lost money that they had invested in finance companies. A few had their entire life savings invested in some of these companies. Many blamed those in charge of the company for it going under. Not one of those who were interviewed by the TV reporter who covered their meetings took responsibility for their situation or even admitted that they made an error in placing all of their eggs in the one basket. Why did they not diversify their portfolio in order to minimize the risk of losing everything in one hit. Placing all of your eggs in the one basket is just like going to the races and putting all of your money on the one horse. It is easy to be upbeat when things are going well, but try getting along with someone who has taken a heavy loss.

When choosing where to invest, the question one has to ask is, “How will the loss of this money affect my lifestyle?”

Greed gets the better of some people, so much so, that they ignore all of the telltale warning signs. 

Financial experts warned investors about the risks of investing in financial companies which offer high interest rates, saying, “The high interest rates do not reflect the risk investors are taking with their money.”

  1. Learn from the experience

Then you can take it on the chin and accept that you made an error of judgement. Experience is an expensive teacher but you have to invest in order to gain experience and become financially literate. It is important to get over the fear of loss when investing for the long term. If you are investing for the short term such as for next summer’s vacation or for a car then you may want to invest conservatively.

The question that needs to be asked is, “How will the loss of this money affect my lifestyle?”

When I say loss, I mean if the share market drops by 5% or more. You lose only if you sell your shares. A 5% drop in the market is not a problem for those investing for the long or medium term. 

The only way to get experience is to invest. Experience is your best teacher; this applies to any job or activity which you undertake. You will make mistakes; don’t beat yourself up or blame others; learn the lesson and take that into your future decisions.

About this article

This article 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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Your Money Your Responsibility 

Your Money Your Responsibility 

Written by R. A. Stewart

Your money is your responsibility. It is your choice what you do with it once it becomes yours, but you have the responsibility of how you manage your money. Being a good steward of money means being responsible for how you use it. This requires maturity.

Here are the main factors which will help you become a good steward of money.

  1. Gaining a financial education

It is your responsibility to become financially literate. In this day and age where there is so much information available on making the most of your money, it is inexcusable to be financially literate. 

All it may take for you to find books on personal finance is to just visit your local library. If you are prepared to spend a bit of money then you may find some good books at your local bookstore.

Frances Cook, Mary Holm, and Martin Hawes are excellent New Zealand authors of Financial books.

  1. Make your own decisions

Some people will get others to make decisions on their behalf, so that whenever something goes wrong they always have someone to blame. “You told me to invest in such and such company and now I have lost my money.” It is your money so that it is your responsibility to make the most of it. 

  1. Accept your own mistakes

Investing is a learning process. In order to become a good investor you need to invest and gain experience doing so. Mistakes will be made. The important thing is to learn from them and move on. 

  1. Living within your means.

It is your responsibility to live within your means. This means that if you choose to get married, have kids, or buy a car, then it is your responsibility to ensure that you are in a suitable financial position to do these things. 

  1. Pay all of your bills

Everyone has fixed costs such as utilities, phones, and whatever. It is the responsibility and the mature thing to pay all of these on time. A bad credit rating can hurt your chances of obtaining a mortgage in the future.

  1. Save a portion of your income

It is your responsibility to save a portion of your income to provide some kind of cushion for a future financial setback. Establishing a rainy day fund is always suggested by financial experts.

  1. Listen to wise advice

The markets went up and down and they were all down after President Trump announced tariffs on overseas imports to the US. The experts in New Zealand were advising investors to remain calm during this time and not to react to the market slide by changing funds. “This is the nature of the markets,” they said. Many did change funds and when the markets recovered the losses, these people missed out on the gains. As a result, their kiwisaver balances took a hit. 

Your financial plan has to take into consideration the market volatility. The question is, “If the market dropped 5% or whatever, how will this affect my lifestyle?”

If you have ten or so years remaining till you retire then the answer is that it won’t in the short or medium term. 

It is your responsibility to heed advice when it is given but at the same time have the common sense to know whether the advice is good or bad.

Once you have gained enough experience at investing you will have the know how to discern whether advice is good or bad and what the motive is behind the person giving the advice.

About this article: The opinions expressed are those 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 at www.robertastewart.com

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The Percentage Formula

The Percentage Formula

Knowing how to work on percentages is a benefit in the area of finances.

If you are figuring out the return of your investments, you will need to know how to calculate percentages. 

Here is an example:

Your return on an investment of $100 is $7. The formula for working out your return in terms of percentage is:

(a) 7 multiplied by 100 =700

(b) The answer is a being divided by 100= 7%

Your return $7 is multiplied by 100

Your investment of $100 is divided by 700

Shirley has $5,000 in her personal savings account and has received $100 in interest off that money. In terms of percentage, what is her return on that money?

(a) $100 multiplied by 100 =$10,000

(b) 10,000 divided by 5,000= 2

Shirley has received 2% interest on her money.

This formula does not include tax so supposing Shirley pays 17.5% tax.

The formula for working out the tax which needs to be paid on interest is straight forward; it is:

Interest received (income) multiplied by the individual’s tax rate (17.5%).

In Shirley’s case, this is $100 multiplied by 17.5% equals $17.50.

Her net return on her money is $82.50.

17.5% is 0.175

An example such as this shows us the futility of just leaving your money in the bank without investing it. The combination of inflation and taxation means that those who do not invest are losing the value of their money. 

Saving money is a good habit to get into, but it is also important to get into the habit of investing. This increases your financial literacy.

Some people do not invest their money because they are afraid of losing their money, yet they will buy lottery tickets which is a sure-fire way of losing. 

Knowing how to figure out percentages is a skill which will assist you in different areas of your life.

Here are some examples of where knowing how to calculate percentages will be a valuable skill.

Shopping & Discounts: Calculate discounts during sales (e.g., “30% off”).

Tips & Service Charges: Determine how much to tip at restaurants (e.g., 15% or 20% of the bill).

Tax Calculations: Compute sales tax (e.g., 8% tax on a purchase).

Budgeting & Expenses: Track spending (e.g., “20% of my income goes to rent”).

Loan & Credit Card Interest: Understand interest rates on loans or credit cards.

About this article:

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

www.robertastewart.com

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The Cost of Financial Illiteracy

Written by R. A. Stewart

There is a cost to financial illiteracy and this cost can be passed down to generations and society. Financial illiteracy leads to poor decision making, debts, and missed opportunity for wealth building. 

  1. Poor choices

Financial illiteracy leads to impulse spending, living beyond one’s means, which leads to financial problems. All of this leads to borrowing which in turn leads to debt. Such people are often vulnerable to loan sharks which leads them to a cycle of debt.

Not surprisingly, these people have no savings, therefore, are caught out when some unexpected bill arrives such as an appliance breaking down, or the car needs fixing.

  1. Increased Debt and Financial Stress

Being unable to pay bills on time will lead to financial stress and mental health issues. It will also lead to relationship issues as lenders are sometimes family members who lend money, often with no interest attached may not see their money again. The borrower will sometimes use the excuse, “I did such and such for you”, in order to squirrel out of repaying the loan. This leads to resentment on the part of family members.

Smart money managers will not borrow for consumable items. “If you don’t have the money, you don’t buy it” is a good rule to live by”.

  1. Missed Investment opportunities

People with no financial literacy will not invest their money and therefore miss out on the opportunities to increase their wealth.  They will leave their money in a personal savings account which pays little interest which does not even cover the cost of inflation. As far as retirement goes, they have little savings to fall back on in later years.

  1. Vulnerability to Scams and Fraud

Financially illiterate are unaware of the red flags which are common in scams, therefore, are vulnerable to be taken in by them.

  1. Higher costs for Financial Services

A financially illiterate person will choose financial services and insurance not applicable to their needs or accept advice which is not compatible with their personal circumstances.

  1. Impact on Future Generations

Parents who are not financially literate may pass on their traits and attitudes to their children, passing on their poor financial skills to the next generation. This could also mean that they are unable to contribute to their children’s education, limiting future opportunities.

  1. Health and Lifestyle Consequences

Poor financial choices can also lead to poor health outcomes. It can also inhibit your ability to purchase a home, start a business, or pursue higher education.

  1. Limited LIfe Choices

Lack of financial skills will inhibit your ability to enjoy a more fruitful life. If you are not living within your means then overseas travel, further education, and starting a business will all be out of reach. Certainly, people who have no savings whatsoever are not fit to be in business because if you cannot even manage your own money then the lack of financial management will mean certain failure for the business.

“Financial literacy is not an expense, it’s an investment in your future.”

About this article

You may use this article as content for your blog/website, or ebook. Read my other articles on www.robertastewart.com

The content of this article is of the opinion of the writer and may not be applicable to your personal circumstances, therefore discretion is advised.

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