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Mistakes made by ordinary investors

If you have money invested in your country’s retirement plan then you are an investor whether you know anything about the markets or not. Chances are you have your money invested in some kind of mutual fund which is managed by a fund manager who invests on your behalf. It is up to you to decide on which fund to invest in and for how long.

1-Too Conservative

You have got to learn how to be an investor and take calculated risks; there are no two ways about it. You can manage these risks to take into consideration your age, goals, and your timeline. If you have your money in conservative funds and you are in your twenties then your retirement fund will fall far short of where it is likely to be when you retire. Investing in growth funds is all about achieving capital gains. 

2-Too inconsistent

Lack of consistency as far as contributing to your retirement fund will cost you in the long run. It is easy to be consistent in your contributions when the share market is going strong but it is when the markets are bearish that you need to motivate yourself to keep investing because during the low points is when there are bargains in the share market. If you are working in some type of job then a percentage of your gross wages will be deducted and deposited into your kiwisaver account.

3-Too Emotional

Fear and greed is what drives the share market is an old cliche which rings true. Many investors react to the market’s swings and roundabouts and sell when they should hang on to their stocks. Investing in the share market is a long term game; it is not a sprint, it is a marathon. If you have some kind of retirement fund then your fund manager invests on your behalf, however if you are in New Zealand you are able to switch funds which some investors do in reaction to what the market is doing. If you have some kind of financial goals then this should take into consideration a possible share market crash.

4-Too Greedy

Many investors are simply too greedy; they invest in something offering high returns without paying any attention to the risk they are taking on, or worse still, they place all of their eggs in one basket hoping to make a killing. This all or nothing approach has destroyed several retirement plans. This was certainly the case when several investors saw their life savings disappear with the collapse of several finance companies. Diversification minimizes your risk.

5-Too Impatient

Patience is the name of the game in investing. It is time and not timing which will build your retirement riches. There will be ups and downs in the markets but a bit of patience will pay off in the long run. Something some people do not have so they invest in risky stuff offering quick returns and end up losing more often than not. 

6-Too Gullible

There are offers or as they are called “opportunities,”promoted online mostly and sometimes in the print media as a way of making quick profits. If an investment seems too good to be true then it mostly certainly is. Usually the person or company promoted such offers are the ones making money out of it. You may have read stories about the amount of money such people have made from whatever it is being promoted but they are in the minority. 

It is up to investors to take responsibility for their own decisions and not try to find a scapegoat if things turn to custard.

www.robertastewart.com

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Who do you turn to for advice during the market slump?

Written by R. A. Stewart

There is advice flowing in all directions on the best way to manage your finances during the market downturn. Who do you turn to for advice? Well, for a start, it is up to each individual to take responsibility for their finances and do their own due diligence. The possibility of a share market crash should have been factored into your plans. How often has it been said that your age and tolerance to risk are two factors that determine where to invest your money. If you are in your 20s then the market slump should not be an issue for you as far as your retirement savings are concerned because you have the advantage of time on your side. It is a different story, however, if you are saving for a house deposit. If this is the case then your money should be in more conservative funds but it all depends on how soon you need the money to purchase a house.

Eight years ago I was doing a mystery shopping assignment for a kiwisaver scheme and was advised to scale back to more conservative funds because of my age. I did not do that but if I did I would have missed out on the gains which occurred during that time. My kiwisaver balance would have been a lot lower than it is even during the current slump.

Personally, I am prepared to just weather the storm. How long this will last, who knows?

There was a financial advisor on TV one night saying, “People need to invest money at a higher rate than the inflation rate,” but she didn’t specify where we are supposed to find such an investment since the inflation rate is higher than fixed term interest rates.

Another financial advisor on TV said “Investors need to think about where they will be in ten years time rather than ten minutes time.” He said, “Investing in the share market is a long term game.”

Investors may be tempted to invest in something offering high interest rates. It is worth reminding people that during the Global Financial Crisis of 2007 and 2008 several finance companies went bust leaving a lot of investors out of pocket. In fact some investors lost their entire life savings in some of the company collapses.

A young woman was interviewed on TV last week and she told the reporter that she was in a conservative fund (in Kiwisaver). She wasn’t concerned about the tumbling markets. She was oblivious to the fact that she had missed out on all of the gains which the share market had made over the years and she will miss out on future gains in the markets because it is a good time to invest in the markets right now and this particularly applies to the young ones. The reason why it is a good time to invest is because you will get more units for your money. 

If you are saving for something for the short to long term then it is better to have your money in more conservative funds. These are decisions that need to be made by each individual and not others. It is about taking full responsibility for the outcome and not blaming others.

Disclaimer: This article is based on the writer’s opinion and experience and may not be applicable to your situation. If you require qualified financial assistance then see your bank, financial, or budget advisor. You may use this article as content for your ebook. Check out my other articles on www.robertastewart.com

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Share market tips for the Mum and Dad investor

Share market tips for the Mum and Dad investor

Written by R. A. Stewart

I think it is fair to say that a lot of people dream of hitting it big on the share market and some do but for everyone who has found a pot of gold in the markets there are countless others who entered the markets blindly without doing their homework or having a strategy in place; this article is to give you some pointers if you have some money to spare and are looking for somewhere to invest your hard earned cash.

In the share market, as in real life, if you are able to reduce your number of bad decisions then you will be better off; not that there’s anything wrong with making mistakes.

You are sometimes better off by learning a lesson the hard way if that is what it takes for you to get the lesson. 

Here then are my sharemarket pointers.

1 Investing directly into the share market is beyond most small investors because their abilty to diversify their portfolio is limited therefore the only option is to invest all of their funds in one company which leaves them open to disaster. If that particular industry which the company is involved in suffers a downturn, value of the share heads south. It is similar to a horse racing fan attending the track and betting all of their money on the one horse instead of dividing their bankroll between several horses.

Small investors are able to invest in the markets, however, and enjoy the same benefits of larger investors by investing in managed funds; this is where your savings are combined with other investors. You do not have the choice of which companies to invest your money in as that decision is left to the trust manager, however, you can choose which type of fund to invest in whether growth, balanced, or conservative.

2 Investing in the markets is a long-term game, therefore, if you require the money in the short term then you may be better off leaving your money in fixed term interest bearing accounts however, having said that, investing in the markets can increase your savings if you give it enough time. Young people have the advantage of time on their side; they are able to take more risks with their money because they have more time to recover from financial setbacks than their parents.

3 Don’t try to time the markets! It is time and not timing which is the key to making money in the share market. If you are waiting until the markets dip before investing you are missing out on plenty of opportunities to increase your capital and this is particularly true in a rising market. 

4 Decide whether the money is required in the short term, medium term, or long term before deciding on where to invest your money. 

Money needed in the short term or on standby is money which may be needed for car repairs, a holiday, household expenses etc

Medium term funds is money needed for a new car

Long term funds are savings for your retirement such as your superannuation funds.

Short term is not money which should be invested in bank deposits where you are able to have easy access to it.

Medium term money can be invested in managed funds where you are able to have easy access to it but still have the potential for it to grow.

Long term money is money invested in a retirement fund such as kiwisaver in New Zealand.

Conclusion

Think of money as “seed,” it will reap a nice harvest if you give it enough time, therefore you need to sow enough seed in order to increase your wealth; the sharemarket is an excellent investment and managed funds makes it easier for the ordinary person to get involved in the markets. My site www.robertastewart.com has articles to help you increase your wealth. CHECK IT OUT!

Sharesies

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

Note: This article is of the opinion of the writer and does not represent financial advice.