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Avoid these three Financial Mistakes

Avoid these three Financial Mistakes

Written by R. A. Stewart

Building an investment portfolio is similar to building a relationship. It takes time and patience but over caution can be just as costly. A lot of tolerance is required because in finance and in life in general you do not always get your own way. Life has its own ups and it is during the downs that we show our true character. It is when our true colours come to the surface.

Human nature or emotion as it is can interfere with one’s better judgment. This applies to relationships and finance.

Here are the biggest mistakes made by investors.

Mistake number one-Greed

“If something is too good to be true then it almost certainly is,” but many people have fallen into this trap by investing in something which was offering above average returns. In doing so they completely ignored another rule in finance and that is to diversify. During the 2008 Global Financial Crisis many investors lost their entire life savings when various finance companies went under. Several people have their entire life savings invested in one company. Whatever has been reported about these companies it is up to investors to do their own due diligence and invest sensibly. Placing all of your eggs in one basket is certainly not investing sensibly. The key word for sensible investors is “diversify.” This minimizes risk. Two things to bear in mind is that when there is an opportunity for a capital gain as there is with shares, there is also the chance for a capital loss. The other thing to remember is that when you hear stories of someone who made a killing on the share market by placing all of their eggs in one basket, you seldom hear of individuals who tried the same thing and lost their money. Greed will eventually get the better of investors who thought they were smart enough to beat the market.

Mistake number two-Timidity

Playing it safe is risky. Being overcautious will mean that you miss out on opportunities which risk takers take advantage of. There is no suggestion that you should be reckless and ignore common sense precautions but in relationships you need to risk getting hurt in order to discover what you are looking for. As far as financial matters are concerned, you have to accept some level of risk but this is manageable by diversifying your portfolio. Managed Funds or Mutual Funds as they are also called is an excellent way for ordinary investors to get involved in the share market. In New Zealand, Kiwisaver, Sharesies, Kernel Wealth, Hatch, and Investnow are excellent platforms for ordinary investors to get involved in shares. If you are from the US you may want to look at Robinhood which operates in much the same way as Sharesies.

Mistake number three-Impatience

“It is time and not timing which is important in the share market,” is a cliche which is worth keeping in mind. Patience is a virtue and this is applicable to relationships and finances. Some people lack patience that they invest their money in abc shares then when their portfolio is stagnant they sell those and invest in def and sod’s law, the shares they sold at a lower price suddenly rises meaning they have missed out on any gains which would have recovered their losses. The share market is a long term gain. If you require the money in the short term then investing in shares may not be the right option. Bank deposit probably is but you have got to do your homework. 

It really is up to your own risk profile.

About this article

You may use this article as content for your blog/website and as content for your ebook. Feel free to share this article with others.

The information here is of the opinion of the writer and may not be applicable to your personal circumstances.

Invest in sharesies here:

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.

www.robertastewart.com

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Make Saving a Habit

Make Saving a Habit

If there is one financial habit which will get you ahead it is this one…

Saving!

Why you must develop the savings habit

It is not how big your pay packet is, what counts is what you do with the money. Irrespective of your financial situation, it makes economic sense to save a portion of your income regularly. the mains reasons for saving are;

1-For unexpected emergencies such as car expenses, the washing machine breaking down, or dental bills.

2-To put aside money for your retirement.

3-Holidays or wedding expenses.

4-study expenses

5-Home repairs.

6-To save for a deposit for a home.

7-Saving for a car

8-Saving for a business

Consequences of not having any savings

If you do not have any savings of your own then if an unexpected emergency crops up such as the car breaking down then you may have to borrow the money to pay for repairs and every time you borrow money, the interest you pay means that you are always paying a higher price for goods and services bought with borrowed money than someone who always pays in cash.

Saving money requires you to live within your means and to live modestly. Good savers will not purchase items brand new when they can find the same item in a charity shop at a fraction of the price. 

Your choices will make or break you

Every time you make a choice there will be consequences, good or bad. The key is to make enough good choices to succeed and to minimize your bad choices. It is important to keep your eyes and ears open to what is happening around you and listen to wise people who have succeeded in their chosen field. Having said that, you must row your own boat and discover your own calling in life.

Joining your country’s retirement scheme.

Many countries around the world have their own retirement savings scheme where a portion of your gross income is invested in that country’s retirement fund and your money cannot be withdrawn until you reach retirement age which varies between different countries. (In New Zealand it is currently 65)

Accumulate investments.

It is a good idea to not only have a retirement fund but invest in various areas to increase your financial knowledge. The share market, managed trusts, and fixed term investments are all well worth getting into.

Don’t place all your eggs in one basket

Don’t under any circumstances place all of your eggs in one basket. There is no guarantee that a particular company will not go under irrespective of how solid it appears. After all, if a company is in trouble, its directors are hardly going to shout it out from the rooftops are they? During the economic downturn around 2008, many people lost a lot of money in failed finance companies and the tragedy was that many of these folk invested their entire life savings into the one company. In other words they placed all of their eggs into one basket. The number one rule is to spread your risk. Divide your money among several different companies. That way you stand a far better chance of protecting your financial assets.

Www.robertastewart.com

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Avoiding Dumb Debt at all costs

The quickest way to a financial mess is to borrow for stuff that loses it’s value. You not only pay more for such items but the item is worth less than when you acquired it because it is no longer new once you take possession of it and therefore you will receive less than what you paid for it. This is called “Dumb Debt.”

Avoiding Dumb Debt at all costs

Written by R. A. Stewart

Everyone has seen the television commercials with slogans such as “Buy now pay later,” and the like.

you do not need to save your money to buy that new car, a wide screen TV, that latest smartphone, or a holiday in a tropical island when you can have all these things now. 

Instant gratification is a very expensive habit; one that will lead you to a life of financial challenges.

There have been misleading statements in some of the advertising; one I saw read, “Helping you to get ahead.”

That kind of slogan suggests that the finance company is doing borrowers a favour which is far from the truth.

Loan sharks and finance companies thrive on financial ignorance; a person with even a basic grounding in personal finance will avoid loan sharks as if they had tested positive for covid.

One should ascertain whether the item is a want or a need before signing on the dotted line. 

Many people go into debt because they want to live a champagne lifestyle on a lemonade budget just to impress their friends. They are not happy with living modestly. 

An expensive lifestyle is costly in the long run. 

The parable of the prodigal son is a perfect example. Here was a young man who blew his inheritance on wasteful living and ended up living in poverty due to his lifestyle.

He not only blew his inheritance but was most likely living on credit.

It is borrowing that really kills off a person’s chances of financial success. That interest rate is dead money; it is the cost of borrowing.

Paying interest on stuff you have bought on credit adds to the cost of it and the value of a lot of stuff bought on credit is worth less as soon as you take possession of it.

“If you don’t have the money you don’t buy it,” is a simple philosophy to adopt.

What you think you cannot live without is something others have learned to live without. 

It all comes down to the choices we make.

There are some circumstances when it may be wise to borrow such as when the value of the item you are purchasing is going to make it financially worth your while such as a student loan. This may or may not mean you will get a good paying job but you must be absolutely clear that it is what you want to do otherwise the course will be a total waste of money.

ABOUT THIS ARTICLE

Feel free to use this article as content for your website, blog, or ebook. Check out my other articles on www.robertastewart.com

Disclaimer: The information in this article may not be applicable to your personal circumstances therefore discretion is advised. I may receive a small commission if you make a purchase from any of the links you clink on.

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6 Recession Proof Industries

6 Recession Proof Industries

Written by R.A.Stewart

When a recession occurs self confidence is reduced and spending is reduced. Some industries do well during recessions because whatever happens during the economy we all still have basic physical needs to meet.

Those industries rely on discretionary spending money are those that are most likely to be affected during a recession. In a period of belt tightening people will cut back on non necessities such as travel and the like.

A recession means job losses and while no industry is 100% recession proof there are some that will get through the recession better than others. 

Here are some industries which are expected to do better than average during a recession.

  1. Dairy Farming

Dairy products are basic grocery items and if you have the skills and the aptitude then you will be rewarded for your diligence. Retail outlets whose customers are farmers will buck the recession. 

It is only the price of dairy products which will affect retailers. If farmers have the money to spend they will spend it. 

Company to note: PGG Wrightsons 

  1. Healthcare

Health care will always be in demand, more so with an ageing population. If you are involved in this industry then you will always have opportunities for employment. The number of retirement villages is increasing in line with the increasing ageing population and this provides opportunities for investors with many of them being listed on the New Zealand stock exchange.

Company to note: Somerset

  1. Consumer Basics

There are basic items which are always in demand irrespective of what the economy is doing. Basic food items, toothpaste, toilet paper, shampoo, shaving foam, laundry detergent, and the like are recession proof.

Company to note: Any company which deals in these products.

  1. Pet Food & supplies

People will still spend money on anything related to pets during a recession because pets still need feeding. There is an increase in the number of cats and dogs handed to the SPCA during the cost of living crisis but there is still a lot of demand for pet supplies irrespective of what shape the economy is doing.

  1. Utilities

There will always be a demand for utilities because it is a fixed expense in every household. 

Companies to note: Genesis Energy, Mercury, Mighty River Power, and Contact Energy + others.

  1. Alcoholic Beverages

There will always be a demand for alcoholic drinks and has been for the past 2000 years and beyond. 

This list is by no means complete. There are dozens of industries which are recession proof; it is just a matter of choosing one which best suits your skill set if you are in the process of choosing your vocation or changing the one you already have. It is a good idea to add a few strings to your bow by working in different types of jobs or careers. 

As far as the share market is concerned, it provides some insight into which companies are likely to survive the cost of living crisis better than others.

This article is of the writer’s experience and opinion and may not be applicable to your personal circumstances.

Disclaimer: I may receive a small commission if you sign up for sharesies or coinbase.

Www.robertastewart.com

#recessionproof #personalfinance #retirementsavings

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The difference between assets and liabilities

ABOUT THIS ARTICLE

Knowing the difference between real assets and real liabilities and then setting your financial goals accordingly can be the difference between getting yourself financially sorted or the poorhouse. It underlines the value of financial literacy in helping achieve your goals.

The difference between assets and liabilities

Written by R. A. Stewart

An asset is something which pays you money while an asset is something that costs you money.

So let’s look at some examples.

Is property an asset or a liability?

Some people may say it is an asset because it is something you own, however, if you owe money on that property and are not getting a return on it then it is a liability because it is costing you money.

Is it an asset if you are receiving rent from that property?

Only if you are making a profit.

Some people would not agree saying, “The property is increasing in value over time.”

Lets not forget there are rates to pay plus maintenance costs and insurance to pay on that property so it could be costing you money in the long term but you will have to sit down and do your homework. 

Other investment times are less complicated such as the sharemarket so lets look at other investment types which are assets. 

Assets

Your retirement fund

Mutual Funds, also known as managed funds

Other investments

Business or farm

Learn to invest your money in items that can be quickly converted back to cash; some investments do not allow you to quickly turn the asset back into cash without jumping through several hoops.

Liabilities

Any item which has money owed on it and this is your form of transport, however there are circumstances where it may be an asset such as if the vehicle is used as a taxi, which therefore makes it an asset as it is producing an income. Such costs and the money owing on the vehicle can be tax deductible. The same applies to any vehicle used in a business.

Even though a vehicle used for work and business purposes may be classed as an asset, the money owed on that vehicle is a liability and will go into the accounts as such.

The reason why so many people are in such a poor financial state is that they borrow for stuff instead of saving for it and therefore pay more for that item in the form of interest payments.

A pet can be classed as a liability if it is costing you an arm and a leg to keep. Think of a dog for example; I read somewhere that it costs $20,000 to keep a dog during its lifetime. That is not just the food but vet bills and the like. A dog can be classed as a liability.

Do a stock take

Before you know where your money is going you need to do a stock take of all your spending. Your number one priority has to be the elimination of debt and plug up those leaks in your spending that is costing you money. In this way you will know where to make savings and redirect that money elsewhere.

Your task needs to be to reduce liabilities which means reducing debt then once you have savings use it to build your wealth. This involves setting goals which will increase your wealth and not send you to the poorhouse.

There are a number of share market platforms where you are able to drip feed money into the markets. Take advantage of these as they are a great way to build your financial literacy.

ABOUT THIS ARTICLE

Accumulating assets instead of liabilities will lead to a more prosperous future. It is vital for investors to know the difference between the two. In this article Robert Stewart explains this difference. Check out his blog at 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

 

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Relationships can hinder your wealth plan

Relationships can hinder your wealth plan

Written by R. A. Stewart

“He who walks with wise men shall become wise but a companion of fools will be destroyed.”Proverbs 13:30

The person you form a relationship with can destroy your wealth creation plan and your future financial success if you CHOOSE the wrong person and I emphasise that word CHOICE because so many people during the Cost of Living Crisis blame the government for their financial situation and are completely oblivious to the fact that it is their own choices which put them there in the first place.

I mean let’s face it, only a responsible person will enter into a relationship when they are in a suitable financial position to do so and that is not the only issue.

If your chosen partner has a bad credit rating and you have a good credit rating then guess who is going to be persuaded to sign along the dotted line when your partner wants to borrow money for whatever reason?

Then there will be the difficulty in getting a mortgage if you both want to purchase a house and you have a good credit rating and he doesn’t. It has happened!

Another factor is your prospective partner’s attitude to money. Has he or she made any kind of financial plan for the future? A responsible person would!

At the very least they should belong to a superannuation scheme, in New Zealand it is called Kiwisaver.

Years ago I knew an old lady who was still working at an age when others would have retired. She was a waitress. She believed that men who have a lot of money are selfish and stingy. 

Men are better off avoiding gold diggers such as her.

It all boils down to responsibility for your own finances. A responsible person will make provisions for their later years by joining their country’s retirement scheme. In New Zealand this is called Kiwisaver. It should be pointed out that your kiwisaver could become part of property matrimony in the case of a break-up but you don’t even have to be married for this to occur. In New Zealand, a relationship of three years whether you are married or not will mean that any asset acquired during the relationship is equally owned and that includes savings in kiwisaver but only contributions to kiwisaver during the term of the relationship. 

If someone is irresponsible in the matter of finances then it is likely that they are irresponsible in other areas of their lives.

Having wisdom in the matter of relationships will make a big different to your long-term financial position. Lack of wisdom can send you to the poor house.

I will end this with something our teacher Mr. Hart said when we were at school, I was 13 when I was in his class.

During spelling lessons he used to tell us a story with one or two of the words that we were learning and on this particular occasion one of the words was wisdom. He told us this story:

One rainy day he was driving along McGowan Street which is the main street in the town where I attended primary school. (there was no intermediate school back then). Mr. Hart told us that he saw a man sheltering from the rain under the verandah of the shop and the man was reading the Friday Flash which is a horse racing paper. Mr. Hart then said, “If that man had wisdom he would save up his money to buy a raincoat for himself instead of spending it on the horse races.

Such is the value of wisdom.

About this article

You may share/print this article or even publish it on your blog/website/ebook. 

Www.robertastewart.com

The information in this article is based on the writer’s experience and may not be applicable to your personal circumstances therefore discretion is advised.

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Using the rule of 72 to get wealthy

Using the rule of 72 to get wealthy

Written by R. A. Stewart

Do you know how long it takes for your money to double using the rule of 72?

Using the 72 formula it works like this:

Simply divide 72 by the interest you are receiving on your money. Of course the calculation does not include the tax paid on your investment.

Another name for the rule of 72 is compounding interest or dividends as is the case when investing in the share markets. You are receiving an income from your original investment plus from the dividends and interest which are left untouched.

This is called compound interest.

There may be a temptation to hasten the doubling up period by searching for high interest investments. My advice is to be careful because if a finance company is paying it’s depositor’s higher than normal interest rates it only means that they are charging their borrowers higher interest rates than the banks. The reason why someone would pay higher interest rates is because they couldn’t get a bank loan because they are considered risky borrowers.

Several finance companies went belly up during the Global Financial Crisis of 2007/2008. These were companies paying higher interest to their investors than market rates.

I did lose money on some of these companies. On reflection, instead of letting the interest compound I should have taken them and invested the interest into my Kiwisaver account.

The rule of 72 is just as applicable to investing in the share market. Your investment can grow using the same principle in managed funds or mutual funds as they are also called but profits can vary. 

You can calculate how much your investment needs to grow per annum in order to double within a specified time. 

72 / your time frame (years)

If you want your money to double in 10 years then you would need an average annual return of 7.2%

The important factor is time. Young people have that in their favour. 

Someone on the verge of retirement is not going to make plans for what they are going to do in thirty years time. Your age is an important consideration to where and what you invest in.

The rule of 72 also works for borrowers. You can work out how long it will take for your debt to grow with this simple formula: 72 / interest rate so if you are paying 15 percent interest rate the amount you owe will double in 4.8 years.

That is of course assuming that you have done nothing to pay off the debt.

It underlines the importance of paying off debt as quickly as possible.

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 are welcome to use this article as content for your blog or website. 

I may receive a small commission if you sign up for Sharesies or Coinbase.

www.robertastewart.com

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6 Ways to Make Capital Gains

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 deductible. 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 ione 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. 

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 collectibles can give you a sense of satisfaction and profit when you intend 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 Banksy 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.

This article is of the writer’s opinion and experience and may not be applicable to your personal circumstances therefore discretion is advised.

Feel free to share this article. You may use it as content for your blog/ebook.

 

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He who never made a mistake…

He who never made a mistake…

never made anything.

You could read all you can about the share market but investors will from time to time go against their better judgement and invest in something because of greed or it is something they are interested in. I have lost money in the past from some of my investments.

Here is a sample:

Air New Zealand (early 2000s)

This company I thought was a reasonably safe investment. Air New Zealand was once owned by the government but it was privatized during the late 1980s or 90s. However, the company almost went under during 2001 I think it was when their shares dropped to 14 cents each from about $1.50. The government bailed them out and still owns about 51% of the company. During covid, the government bailed them out again after the border closures placed them in a financially precarious situation.

Lombard Finance L.T.D

This was one of those finance companies which offered higher interest rates than the banks for fixed term accounts. Lombard as it turned out had too much money tied up in too few projects and when one of their creditors folded it brought Lombard down with them. It lent money to property developers. Lombard Finance collapsed in 2008

Provincial Finance L.T.D

This company lent money for consumable items such as cars etc. It, like Lombard, offered higher interest rates for fixed term than the high street banks. It was also a victim of the Global Financial Crisis.

Dominion Finance L.T.D

Another finance company which fell victim to the Global Financial Crisis. It too offered higher fixed term rates than the banks were offering.

Must be a lesson there somewhere.

These were by no means the only finance companies which went belly up during the G.F.C; South Canterbury Finance and Hanover Finance were high profile collapses. 

Some investors lost their entire life savings in Hanover FInance. 

That is a classic case of putting all your eggs in the one basket; a crucial mistake which affected how some folk will live during their retirement years. 

Greed sometimes over rules better judgement.

We sometimes hear stories of young folk who have bought xxx stock in xxx company which has risen in value by a ridiculous amount. This type of rise is not sustainable and it is only a matter of time before the rising share value slows or in some cases takes a spectacular dive. 

I mentioned young folk because they do not have the past experience of older investors.

It has to be said that those who have made the most investment mistakes are likely to be in a better financial situation than those who played it safe all their lives and just kept their money in low interest accounts. Certainly better than those who are spenders rather than savers.

The bottom line is that it pays to diversify and spread your risk but the level of risk one takes is dependent on a person’s age because younger people have more time to recover from financial mistakes.

A lot of people cannot stomach the thought of losing a few grand on their investments yet would have problem frittering that money on lottery tickets, cigarettes, or booze. In order to achieve more favourable financial outcomes it is important to do a stock take of your outgoings (spending) and transfer money which would otherwise have been wasted into something more profitable. This could be starting an internet-based business, investments, or upskilling.

During the 1987 sharemarket crash thousands of investors lost fortunes. Many of them borrowed money using the value of their shares as collateral and the rising share prices meant that they were able to borrow more money. The collapse of the markets left investors with shares which were worth less than the value of the loans taken out to purchase them. The lesson here is to never borrow money for shares.

Here is a quote from the Auckland City mayor concerning debt levels. “Capacity to borrow is not the issue. It’s the capacity to pay it back.”

The other lesson is that it may be better to invest in upskilling. It never hurts to add another string to your bow.

This article is the result of the writer’s experience and opinion and not considered as financial advice. If you require qualified financial advice see your bank manager or financial advisor.

www.robertastewart.com

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Financial know how

Readers are leaders.

INTRODUCTION

There is no excuse for financial ignorance when there is so much finance information available on the internet and in printed form. Becoming familiar with the various forms of investments will hold you in good stead for the future.

How to gain financial literacy

Your financial literacy is your ability to make financially smart decisions. You were not born financially smart or dumb; your financial knowledge or ignorance was developed over a period of time. I assume that you are not ignorant otherwise you would not be reading this. So without further ado, here are some ways of gaining financial literacy.

Your own experience

There is no better teacher than your own experience but that does not mean you have to go ahead and make all of the mistakes it is possible to make. It is more a case of using your personal judgment based on your knowledge and the advice of others but you will make mistakes along the way; it is a part of the learning process. It is a matter of who to take advice from and whose advice to treat with a grain of salt. 

An excellent way of gaining financial literacy is to register with one or more of the share market online platforms where you are able to buy and sell shares online. Only a minimal amount of money is needed to get involved. In New Zealand sharesies.nz is one such platform but is by no means the only one around. Other countries have similar such share trading platforms available.

Experience of others

The easy was to learn is from the mistakes of others. All you need to do is to keep your eyes open; many people do not do this and instead follow others like sheep. This is not necessarily the best way. In fact history has taught me that following the crowd is often the wrong way. A classic example is the share market when a stock is valued well above it’s true worth because so many people have jumped on the bandwagon and bought shares in that particular company because everyone else is doing it. It is young people without experience in the markets who are prone to this mistake.

It pays to go against the crowd; what this means is that you look for bargains in the markets whether it is gold, shares, property, and so forth. You do not have to experience what others are experiencing if you have the ability to assess what is a good investment and what is not.

Be prepared to listen to what the older generation have to say. Many of their opinions will be based on their own experience.

Books

Ignorance is no excuse as far as not being financially educated because your local library will stock books on finance. There are some terrific books on finance, some I recommend are, “Rich Dad Poor Dad,” by Robert T. Kiyosaki with Sharon L. Lechter. They have several other books which are recommended reading. “How to Be Rich & Happy” by Hans Jakobi, Australia’s wealth coach is another book I recommend. Hans also has several other books published, “Underground Knowledge” and “Due Diligence,” are two of them. “Making money made simple” written by Australian financial advisor Noel Whittaker is a good read. Frances Cook, Mary Holm and Martin Hawes are other excellent financial authors.

The internet

There is a lot of information available online on finance and investing; a simple google search will bring these up but like listening to your mates you have to use your own judgement when assessing the information from some sites and how it relates to your own personal situation. Martin Hawes and Mary Holm are both reputable advisors with good websites.

Newspapers

Most newspapers carry financial information and these are worth reading. Cut out articles that interest you; they make good reading in a year or so. 

www.robertastewart.com

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