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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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Is Kiwisaver for KIds a Good Idea?

Is Kiwisaver for KIds a Good Idea?

Written by R. A. Stewart

Is it a good idea for parents to open a kiwisaver account for kids? 

That is a question I have been pondering because a lassie who writes to me has a three year old son. Here are the pros and cons I considered.

The pros

1 It will give the kid a good start in life as the money can be used for a deposit on their first home.

2 The markets are down which means that there are bargains in the share market.

3 It will help give the kids a tolerance to risk

4 It will help develop their financial literacy

The cons

1 Kids are ineligible for the kiwisaver incentives until the reach the age of 18

2 Money in locked into kiwisaver until they reach the retirement age of 65

3 There are other alternatives

After considering all of this I decided that getting children signed up to kiwisaver in order to help them get their first home is a good idea, however, it is worth noting that if he or she inherits Mum or Dad’s home then they are not eligible to withdraw any of their kiwisaver funds to purchase their first home. Having some form of goal and a route for getting there is better than not having any kind of plan. A plan such as this gives children an option when they are older. I cannot think of any circumstance when any adults may have regrets that their parents enrolled them into Kiwisaver.

It is important to choose your fund and not change because a fund which is on a high will come down while a fund which is low will rise; that is the nature of the markets. Just focus on contributing to kiwisaver both for yourself and your children.

Another important thing to remember is the importance of having a will because if you die without a will then it is likely that lawyers will take a good piece of your kiwisaver if there is a dispute over who gets what. In any will disputes, the person’s spouse will inherit everything, if they are not married then it is their children, if they are not married and have no children then it is their parents and if their parents are deceased then their siblings are next in line. This is of course if the person has no will.

Of course one may argue that due to the high cost of living that it is difficult for them to make ends meet let alone contribute to their own kiwisaver and their childrens as well. If this is true for you then you should make a plan to increase your income or decrease your spending. A combination of both is ideal. Think about this if you saved $5 per week, that is $260 per year. In 10 years that is $2,500 years. $10 per week is $520 per year. 

ABOUT THIS ARTICLE

This article is of the opinion of the writer and may not be applicable to your personal circumstances. Feel free to share this article. You may use the article as content for your ebook and website. 

www.robertastewart.com

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Now is a good time to join kiwisaver if you have not already

Now is a good time to join kiwisaver if you have not already

Written by R. A. Stewart

It is a good time to join kiwisaver if you are young and just starting out in the world. If you are over 30 and have not already joined kiwisaver then why not? Kiwisaver is the New Zealand retirement scheme. If you are in work you will get the equivalent of 3% of your gross wages from your employer deposited into your kiwisaver account. 2%, 4%, or 8% (you choose) of your gross wages will be deposited into kiwisaver and deducted from your pay. You can also make voluntary contributions to your kiwisaver account. This is an option used by those who are self employed or not in work.

The government’s contribution to your kiwisaver is what makes this a no-brainer. You will receive $520 of government money into your kiwisaver account but you need to invest at least $1040 to receive the full $520 otherwise the government contribution is 50% of your contribution. This is per annum; in other words you need to invest at least $1040 into your kiwisaver account per annum to receive $520 of government money every year.

The Kiwisaver year begins on July 1 and ends June 30 the following year. If you are on part time work and it looks as though your kiwisaver contributions are going to be less than $1040, you can make voluntary contributions to ensure your own contributions reach $1040.

In order to take advantage of the falling share prices you need to be in a growth fund or have some portion of your portfolio in a growth fund, otherwise called a balanced fund. If you are in a conservative fund then you are going to miss out on the market rebound. Financial experts will tell you that if you are in a growth fund then you need to leave it invested for at least five years. That way, if the market falls during this time there will be time for it to recover and recoup any losses which it has to be said are only paper losses.

Money which is needed for the short term such as a holiday abroad next year is considered short to medium term money. If you had this money invested in a growth fund you may find that your spending money for your trip has been depleted therefore, to reduce this from happening investing in something less risky is an option taken by a lot of holidaymakers even though the return on this money is less than the inflation rate.

If you are prepared to take the risk then you might consider investing your short term money in growth funds in the hope of increasing your capital but it is important to understand that whenever there is an opportunity for capital gain then there is a chance for capital loss.

It cannot be stressed enough that it takes a cool head to live through the ups and downs of the sharemarket and be relaxed about it. One thing you can always bank on is that the sharemarket will go up and down. It is important to have a strategy in place to take this into account.

Diversification minimizes your risk. Diversification is when you spread your investment among several companies. One company might fall over but not the whole lot.

Some may argue that if you plunge all your money in one stock then you will make a killing; that is true, but you never hear of those who tried that and lost. If you are going to do that then it should be done independently of your main investments rather than risk your retirement savings going down the drain.

ABOUT THIS ARTICLE

The information in this article is of the writer’s own opinion and may not necessarily apply to your personal circumstances. You are advised to seek professional financial advice if you require assistance. You may use this article as content for your ebook or website. Check out my other articles on www.robertastewart.com

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New Zealand women taken in by tinder scams

Millions of dollars are lost by New Zealand women every year to online tinder scammers who operate from overseas.

The Press reported that two women were conned into handing over more than $500,000 (NZ) to the scammers.

The scams involved fake banks, emails, and videos. Police investigators say that scammers are targeting multiple victims at once. They say the scammers are using the same photo and profile in their interaction with different victims. They also used the same sad story about their fraudulent background. 

Those who carry out these scams are experts at what they do. These scammers are present on most dating websites. The conversation is that these often moved from the reputable dating site to Whatsapp.

Another common theme in the scams is that the scammer quickly professes their love for the victim telling them they are working overseas and also that they come from a wealthy background.

Once these scammers gain your trust they will assist you.

There are some red flags to note with dating scammers.

(a) They come up with all kinds of excuses why they are unable to meet you.

(b) They are located in out of the way places such as an oil rig.

(c) There is always a sad story to tell their victims.

Scammers play on their victim’s emotions. What lady does not want to be fussed about? Some women will be so taken by what they think is a new man in their life that they ignore all of the red flags. As the saying goes, “Love is blind.” But their fantasy becomes a nightmare as their new found friend disappears as quickly as their money.

It is up to everyone to do their due diligence. Here are other red flags to note:

(d) The other person wants to hasten the relationship

(c) In the first message,  your prospective date says, “age, nationality, and gender is immaterial.”

(d) Your potential date claims that they are christian but the contents of their correspondence does not line up with christian values.

(d) Their profile photos have left little to the imagination.

Check out this link to a recommended dating site:

Find your date here

www.robertastewart.com

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Crypto-scams on the rise

Crypto-scams on the rise

Written by R. A. Stewart

A newspaper article appearing in the Christchurch press headlined, “Cyber-scams cost Kiwis $3.7m highlighted the dangers posed by those who are investing in online share market, crypto, or NFT platforms. The $3.7m refers to the amount lost to these types of scams in just the first three months of the year.

The sudden rise in popularity of NFT’s (non-fungible tokens) is a contributing factor in the rise of scams.

Cryptocurrency scams are increasing according to the article but not to the same extent as those scams relating to NFTs.

NFTs are unregulated and expensive and payment was difficult to reverse. 

The fear of missing out has created a demand for crypto and NFTs which has resulted in many investors investing in something which promised a great return only for it to be just a scam.

The article gave this great advice which really is applicable to all kinds of investments whether it is online or offline and that is to do your due diligence. 

As far as cryptocurrency goes, due diligence means searching the name of the investment with the words “scam alert”, or searching the FMA warning and alerts page.

Another important thing is to not feel pressured in anything. If you are told to invest within a short time or you will miss out then don’t bother because the promoters of such a scheme are only trying to take advantage of the “Fear of missing out,” mentality in you.

A phishing scam is the most reported scam. It is when you receive an email from someone posing as a trusted site or business in order to gain your personal details. They ask for your log in details and use it to gain access to your accounts. Different strategies may be used and one is when you receive an email asking you to verify your account. When you register for a site you are asked to verify it within 24 hours of joining. If you receive an email asking you to verify your account months after you registered then be wary and do not click on the link provided.

It is also a good idea when registering with a crypto or NFT site to use an email address which is different from your personal one and certainly do not use the same one you would normally use for your banking or online auctions.

As far as banking goes; do not use your main debit card for crypto trading but rather a separate one because of the risks of hacking. Even with all of your own due diligence, there is also the possibility that the crypto exchange website with all of your banking details will get hacked and that is out of your control. It is up to each investor to do their own homework and take responsibility for their own decisions. That way you have only yourself to blame if you lose your money.

ABOUT THIS ARTICLE

Feel free to share this article. You may use this article as content for your website or ebook. Read my other articles on www.robertastewart.com

DISCLAIMER: Please note, this article is not intended as financial advice but rather the opinion and experience of the writer. Caution is advised when investing in cryptocurrency or NFTs.

www.robertastewart.com

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Three sure ways to lose during the bear market

Three sure ways to lose during the bear market

The sluggish year so far for the money markets has made some investors nervous and questioning how they should react. It is important to maintain the right attitude and stick to your plan or you may regret it later on. If you have invested with the right strategy then it is only a matter of living normally and riding out the storm. 

If you have noticed that your share market portfolio balance is lower than at the start of the year and thought, “I have lost xxx amount of money,” then you are not alone. These are only paper losses. There are three sure ways of losing money during a share market downturn, so here they are:

1-Selling your shares

If you sell your shares during a bear market and then the market rebounds you will miss out on the gains that would have recouped your previous losses. You should bear in mind that they are only losses if you cash up when the markets are down. Any financial advisor will tell you that shares are a long term investment.

2-Transferring to more conservative funds

Transferring your funds from growth to conservative during a downturn is a bad time to do it for the same reason as selling your shares at this time. Once the markets rebound you will miss out on the gains when they eventually come.

3-You stop investing in your retirement fund

This too is a bad move. In fact it may be a good time to invest in the markets because you will receive more units for your money which means your investment will grow. Who knows where the markets will be in 5-10 years time. If you have the luxury of time on your side then you can afford to take on more risk with your money.

Inflation is detrimental to your wealth

Keep in mind that if you invest in conservative funds then inflation will erode the purchasing power of your money, however, that is not so much of an issue if you require the money in the short to medium term. It all depends on your time frame and your goals.

DISCLAIMER: Please note this article is of the opinion of the writer and does not constitute financial advice. If you need financial advice then see your bank.

www.robertastewart.com

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One rule for investing you need to consider

One rule for investing you need to consider

Written by R. A. Stewart

The one question you MUST ask yourself before investing your money is, “Can I afford to lose this money?”

Only you can answer this question, but…

that depends on when you need the money and what the loss of your investment will mean for your other goals.

For example if your goal is to save for a car within the next 18 months or so then this is considered a short to medium term goal which means that investing in something with low risk is imperative. Growth funds on the share market and bitcoin are out of the question because the loss of your investment could mean that you may not be able to purchase that car. It really comes down to how badly you require that car. If it is essential for you to get to and from work then you cannot afford to lose the money that you are saving for a car.

The same is said for money which you are saving for a house deposit but it really depends on how soon you require the money. If you are looking at a 10 year timeframe then investing in growth funds may increase your savings faster but no one can predict when and if the markets will crash so it is really a risk to invest your house deposit money this way but the flip side is that if there is a 1987 style crash then house prices will also tumble so less money will be needed to purchase a house.

Can you afford to lose your retirement fund? The answer is no but…

Where your retirement fund is invested all depends on how soon you need the money. Some financial advisors will tell you to scale back the risk as you are approaching retirement but the problem is that if you start doing that when the markets are down you are taking a loss and missing out on any gains which will happen when the markets rebound. The other thing to remember is that you are not going to just spend all of your retirement funds as soon as you retire. You may live another 20 years and that is ample time to recover from any crash which will occur near your retirement. Of course you may want to tick off as many items off your bucket list as you possibly can so the early stage of your retirement will be when you will want to do as much as you can. You certainly do not want to sit in an old folks home at 90 with any regrets.

The size of your retirement fund when you require it is determined by where you have invested your money. If you just saved your money and just left it in low interest accounts you will lose.

How? 

Because inflation will erode the value of your money. Then there is tax on the interest.

It is important to learn how to invest for a better outcome and where you invest should be determined by your age and how soon you need the money.

Saving up for a house is the biggest single investment in one’s life with a car being the second biggest. Not everyone has ever bought a house or car but have saved money for other things; here is a list of other items which many people are spending their money on:

*Paying off a student loan

*Saving for an overseas holiday

*Saving for a business

*Paying off a medical/dental bill

These are major items. It has to be said that saving for a holiday can be considered discretionary spending and therefore will not cause you a great deal of hardship, just disappointment if you lose this money in the share market.

Setting priorities is an important part of managing your finances and the one question that should be asked is, “Can I afford to lose this money?”

NOTE: You may use this article as content for your website or ebook. Feel free to share this item.

www.robertastewart.com

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FINANCIAL GLOSSARY

Financial language

Written by R. A. Stewart

It is important to familiarise yourself with financial jargon and their meanings. Do your research on the internet for further information on what these terms mean. This increases your financial literacy.

ASSET RICH-CASH POOR

This refers to people whose wealth are tied up with their property but have little cash in the bank.

BAD DEBT

Usually described as consumer debt or dumb debt, bad debt is when one purchases consumer goods on credit. It is bad debt because the item which has been purchased loses it’s value over time.

CAPITAL GAINS.

This is the increase in value of your asset. It is important to keep in mind that if there is a chance for a capital gain there is also a chance for a capital loss.

CASH ASSET

A cash asset is money in the bank, stocks and shares, and any investment invested with a financial institution.

EQUITY

When someone refers to the equity in their property, they mean how much equity is left after deducting the money owed on the property from its value.

DEPRECIATION

Depreciation is the reduced value of any item purchased. A vehicle is a perfect example of something which reduces it’s value over time.

FINANCIAL PLAN

A plan for your money. To address money issues.

GOOD DEBT

Borrowing money for something which increases in value is considered to be “good debt,” however, it needs to be stressed that if something can increase in value then it is just as likely to decrease in value; shares and cryptocurrency are typical examples.

INFLATION

This is based on the average increase of prices of consumer goods. If your investments are earning less than the inflation rate then you are losing money. 

LIABILITY

This is anything which you have bought on credit and pay interest on. It is said to be a liability. A vehicle is a typical example of a liability. A house could be a liability if it is costing you money but it could be said to be an asset especially if its value is increasing per annum.

NON-CASH ASSET

A property is an example of a non-cash asset. 

RISK PROFILE

This is your temperament to risk and is one factor in determining where to invest your money.

www.robertastewart.com

 

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Investing for seniors

Your age is a crucial factor in establishing your savings and investing strategy. Your 20s, 30s, 40s, and 50s are your savings years. It is these years when you build up your assets. 

Your 60s and 70s can be considered your spending years. It is when you tick off items on your bucket list while you are able to.

That does not mean that you do not have to work to make life more affordable and a lot of older people are taking this option, not because they cannot make ends meet on their pension, but because they enjoy what they are doing.

In New Zealand, retirees will have access to their kiwisaver account once they reach the age of 65. Money invested in kiwisaver will be in growth, balanced, or conservative funds. Most people during their working life opt for growth or balanced funds.

It is time to decide whether to stay with the status quo or invest in more conservative funds. 

Your age and your health are the two most important factors in deciding which fund to invest your money in. 

Older people do not have time on their side to overcome financial setbacks such share market falls and so forth, therefore if you are 60+ it is a good idea to lean toward more conservative investments but still retain some exposure to risk.

It is worth mentioning at this point that New Zealand financial advisor and writer Frances Cook has a formula for calculating how much exposure you should have based on your age, and it is this…

Subtract your age from 100.

If for example you are aged 60 then only 40% of your portfolio should be invested in the share market.

I do not necessarily agree with this formula and my exposure to the share market is more than her formula suggests I have.

However, that is a personal choice; one that I do not necessarily recommend to you because your circumstances will be different as they are for different people.

If you are connected to the internet and you have a lot of spare cash in your account then I suggest that you place most of your money into an account that is not connected to internet banking. This is to reduce your chances of becoming a victim of internet scammers. 

With internet banking being the norm, this could be difficult in the future though.

What I am saying here is to not park all of your money in the same place just in case the unthinkable happens.

It is important to take individual financial advice if you are offered a so-called opportunity to invest your money for a high return. Investments which offer high returns also offer a higher risk and that is something you should avoid in your later years.

Don’t be too proud to ask your family for advice if something you are offered sounds a bit dodgy. It is a good idea to only ask advice from family members who have a good level of financial literacy.

www.robertastewart.com

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RETIREMENT SAVINGS SCHEMES

Kiwisaver Retirement Savings Scheme

“A good man leaves an inheritance to his children’s children.” Proverbs 13:22

Saving for one’s retirement is the responsible thing to do and it is up to each individual to get their own finances sorted for their latter years. New Zealand has their own retirement scheme as most other countries do to help make life easier for their citizens when they retire. 

The New Zealand retirement scheme is called “kiwisaver.” It is open to New Zealand residents. Kiwisaver is voluntary and anyone aged up to 65 can join. You do not have to be in work to join kiwisaver, you are able to make voluntary contributions at any time.

You are about to make contributions through your wages and salaries of between 2%, 4%, or 8% (you choose). Your employer will also make contributions to your kiwisaver account. If you are not employed then you can choose to make voluntary contributions.

The key component of kiwisaver is the government’s contribution which is a maximum of $10 per week or $520 per year but you have to contribute at least $1040 per annum to get the full $520 otherwise you the government will put in 50% of whatever is your contribution.

You will receive the government money sometime in July. The kiwisaver year starts 1st July and ends 30th June and any money deposited into your kiwisaver account during this period will be eligible for the government contribution the following July. You could say leave it until June before you put any money in kiwisaver and still be eligible for the tax credits as the government money is sometimes called.

When joining KiwiSaver you will be given the choice of fund managers. If you do not choose one, the I.R.D (Inland Revenue Department) will choose one for you and when this happens, it tends to lean on the more conservative side. 

You have the option of different funds, Growth, Balanced, or Conservative with growth funds being aggressive. They have the potential to grow your savings but the downside is that they are the most risky. Conservative funds are low risk but can inhibit the growth of your savings while balanced funds are a combination of growth and conservative funds. 

Your savings in kiwisaver are locked in until you reach the retirement age of 65 (applicable in NZ) but you may be able to access your funds under exceptional circumstances. These are if you are suffering from financial hardship, have a terminal illness, or die (money goes to your estate). It is important that you have a will because if you don’t, any money still in your kiwisaver will likely be swallowed by lawyer’s fees.

You may use some of your kiwisaver funds for a deposit on your first home but only after you have been in kiwisaver for at least five years. If you are at that stage where you will be looking at purchasing your first home in the not too distant future then it would be a good idea to go for a combination of balanced and conservative funds when choosing which type of kiwisaver fund to invest in because if you went for growth funds, the markets may have gone down when it comes time to withdraw some of your kiwisaver funds for a home deposit. That would be a double whammy because when the market recovers and is on the up, you have missed out on the gains because you withdraw your money when the market was down.

It is a good idea though to have other investments which can take advantage of the swings and roundabouts of the markets even if you only have a small amount to invest. 

Always try to keep up to date with what is going on in the financial world as this will increase your financial literacy and help you make better decisions on your finances.

Check out my site www.robertastewart.com for useful information on how to increase your wealth.

The information in this article is the writer’s opinion and experience. It is advisable to seek independent financial advice to ascertain the best financial plan for your situation.