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Diversification and what it is

How to diversify 

Written by Robert A. Stewart

Diversification is a term we often come across in the investment industry but what does this really mean for the Mum and Dad investor and how can the ordinary investor profit from diversification? Here is an article written in simple language which everyday investors can understand.

Diversification in the share market

What it is and how you can make it work for you

Diversify, diversify, diversify are terms you will come across in the world of investments so what does it mean and how can you make it work to grow your wealth?

When someone says you should diversify your investments what is meant is that your investments are spread out among different companies and sectors in order to reduce your risk.

An investor may have shares in a phone company, a power company, a bank, an insurance company and so on.

This kind of diversification was once beyond the means of the average investor because one had to purchase at least $3,000 worth of each share just to make it viable because of the broker’s commission on each buy and sell transaction.

Not any more!

Online share market trading platforms such as Sharesies in New Zealand and Robinhood in the US have opened the way for anyone of any means to get involved in the markets. These platforms enable anyone to build up their financial literacy on a shoestring. There are lots of other online investment platforms similar to Sharesies and Robinhood which gives you a wide choice. 

With sharesies the minimum investment you can make is $5 but with Kernel Wealth, another online investment platform in New Zealand the minimum investment is $100. This is just an example of different rules for different companies.

Mum and Dad investors can buy into a range of diverse companies on a shoe string with sharesies and robin hood which in the long term is good for those astute enough to participate.

Investing in individual companies is not the only way to build up a diverse portfolio; the other way is investing in managed funds or as it is referred to in the States, Mutual Funds. 

When buying into these funds you are combining your money with other investors to purchase units  in the funds. Fund managers will purchase shares in a range of companies on your behalf.

The level of risk can vary depending on the industry which the fund manager invests your money.

These investments are generally referred to as Growth Funds which has the potential to grow your savings but at a higher risk. 

Those investors who want a mixture of high risk and low risk funds will invest in what is called Balanced funds. This is a combination of growth and balanced funds. Investors may have the option of choosing which percentage of their investment they would like in growth or conservative funds..

Diversification is an excellent wealth building strategy for the average investors who wants to create a nest egg for the future. It is a matter knowing what you want to achieve with your investments and investing accordingly.

About this article

This article is based on the writer’s experience and may not be applicable to your personal circumstances therefore discretion is advised. You are welcome to use this article as content for your ebook or website. Feel free to share this article. 

www.robertastewart.com

Prevent Spam Comments

For those website owners who want to know how to stop spam comments on their wordpress sites, try this:

Installing WP-recaptcha

Here is how to prevent spam comments on your wordpress site.

1 Log into your WordPress Dashboard

2 Click on Plugins, then click add new.

3 In the search box type wp-recaptcha and hit enter. Click install now next to the WP-reCaptcha plugin.

4 On the next screen click the Activate Plugin link, and the WP-reCAPTCHA plugin will be installed and enabled

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Investing with online share market platforms

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 share market pointers.

1 Investing directly into the share market is beyond most small investors because their ability 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 share market 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!

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

 

Note: This article is of the opinion of the writer and may not be applicable to your personal circumstances

#sharesies #kiwisaver #savingmoney #sensibleinvesting #sharemarket 

 

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Share Price Consolidation

Share consolidation-what is it?

Written by R. A. Stewart

One term you do not hear very often is share consolidation. It is a term seldom used because not many companies have used this as an option. This article sheds more light on the term. Hopefully I have explained it well enough in terms that even the novice investor will understand.

Share market price increase may be misleading

If you are a casual share market follower and notice a particular company’s share price has jumped up in price suddenly and you are thinking, “What have I missed out on,” then it all may not be as it seems.

Let me explain.

Years ago around 2001 I think, I owned some shares in Air New Zealand. The company almost went broke. The company almost went bust. It was the government who bailed them out. The share price went from about $1.95 per share down to 14 cents per share. The share price increased a little but still only a fraction of what I bought them for.

What the company then did was increase the share price but you owned fewer shares.

This is how it works:

For the sake of simple mathematics, let’s assume company xyz’s share price is 20 cents per share.  xyz then decides to increase the price of the share to $1. 

If an investor owned 1000 shares at 20 cents, they will now own 200 shares worth $1 each.

Unless you are a follower of the share market you may be unaware of this actually happening. 

I don’t know how often this situation occurs but it may pay to do your homework if a particular share increases dramatically for no apparent reason.

What I have just tried to explain is known as reverse stock split or share consolidation.

This makes the company more attractive to investors. They may hold fewer shares but the real value of the total shares in that particular company is the same. It is just that now they hold proportionately fewer shares.

Share consolidation can be viewed negatively by investors as a company in trouble and this could impact the share price.

One reason why a company may choose share consolidation is that if it’s shares fall below $0.50 for 30 consecutive days then it will be de-listed. This is applicable to the New York Stock Exchange and there may be different rules for other countries. 

Another benefit of share consolidation is that it will mean fewer share certificates will need to be printed which will reduce costs.

It is always a good idea to check the history of a company’s share price before you invest in it. If it has been the subject of a share consolidation it may show up or at least give some indication that it has. Only a small percentage of companies will have been the subject of share consolidation, therefore, you are unlikely to come across this situation.

ABOUT THIS ARTICLE

You may use this article as content for your ebook or website/blog. The information may not be applicable to your personal circumstances therefore discretion is advised.

 

www.robertastewart.com

#share consolidation

#shares

#mutualfunds

#share market

Start investing on a shoestring

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

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

Disclaimer: I may receive a small commission if you join sharesies.

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Retirement Spending

INTRODUCTION

Spending your retirement years is not all about how you will spend your time but your money also. Ticking off those items on your bucket list becomes your priority. This all takes money. A financial advisor thinks older people should spend their money while they can and travel while they are able to.

Spending your money during your latter years

Written by R. A. Stewart

“Spend your money while you can.”

That is the message of New Zealand Financial Advisor Mary Holm who has recently published another book. 

This message was aimed at retirees. Ms Holm says you should not just leave your money to your children.

She says that she has received letters from people in their eighties and nineties who have said they wished they had done more traveling when they were able to. They were of course referring to when they were in their sixties and seventies.

Holm does have a point but it all depends on how responsible your children are with their money. If they have a house and a retirement plan then you can stipulate that the money can go toward these things. 

Doing stuff while you are able to is probably the best way to live for those who have reached the retirement age and that all takes money.

What Mary says makes sense; helping your children get their foot on the property ladder or through university is one thing but if they are irresponsible with their money then that is another thing altogether. 

This all highlights the importance of teaching your children financial literacy. 

Teaching your children how to invest is just as important as teaching them how to save. Most people are able to save money but most are saving to spend rather than saving to invest.

It is investing which will make life easier in the long-term.

Your priorities will determine how you are going to spend your latter years and there is no law to say that you have to retire at a certain age; a lady in her eighties was still working at our local supermarket. Everyone is on their own I suppose but I don’t see the point of that since our country (New Zealand) is very generous to its retirees. It was only ill health which caused her to stop working and then she succumbed to her illness not long after.

Deciding what is important to you is all about setting goals; Anthony Robbins book, “Awaken the Giant within,” is certainly worth reading. 

In the chapter on “Goal Setting,” he talks about taking the rocking chair test. If you were to sit in your rocking chair at the age of ninety what would you regret about your life?”

“Don’t die wondering,” is a saying worth remembering. It is important to enjoy the stage of life you are at because there may come a day when you regret not having made the most of that particular stage of life.

Planning for the future is just as important; its getting that balance right which is the key. There is no point in blowing your retirement fund during your first year of retirement if it is going to leave you in poverty for your remaining years.

SUMMARY

A work colleague said to us once, “I can’t understand these old people who live frugal lives only to leave their money to someone else.” Making sacrifices in order to save money is understandable when you are younger but not when you are past the retirement age. (unless you are living from paycheck to paycheck). Live your best life now while you can and not just hoard your money for the younger generation to fritter away.

www.robertastewart.com

 

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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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The averaging system for shares

The averaging system for shares

Averaging is a term which has been used by share market followers over the years. This is when an investor buys several shares in the same company over a period of time and the average price which was paid per share may be higher or lower depending on which direction the share price is going.

Here is an example of one New Zealand company, Fletcher Building beginning with January 4, 2023. The first three days of the year were public holidays so January 4 was used as the starting date and every seven days after that.

Date Share Price

4/1 4.71

11/1 4.90

18/1 5.06

25/1 5.11

1/2 5.25

8/2 5.46

15/2 5.07

22/2 4.81

1/3 4.71

8/3 4.65

15/3 4.50

Now let us assume that you had purchased Fletcher Building shares on each of these dates, investing the same amount of money. You would simply add up the totals of these prices and divide the answer by 11. That is the average price you paid for the share. In this case the average price you would have paid for Fletcher Building shares would have been $4.93 if you had bought them every week. 

We all know that shares go up and down so drip feeding shares into the market in this way will ensure that you have bought shares at a lower price when they are down as well as when they are on an upward trend.

Online trading platforms such as Sharesies and Robinhood make this process easy. If you have more money to spend you may want to choose two or more companies per year to invest in using this system.

As with other investment strategies you need to ask the question  “Where does this fit in with my financial goals?”

About this article

You may use this article as content for your ebook or web page. The information may not be applicable to your personal circumstances so discretion is advised.

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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The Art of Averaging 

INTRODUCTION

Investors must realize that investing in the markets has its ups and downs (literally) that it is important to keep it all into the right perspective if investments do not go your way. There is a method of playing the markets in a way that you can take advantage of the market drops. 

The Art of Averaging 

Averaging is a term one may come across in the markets now and again; what this refers to is the average price paid for a particular share if you had bought shares in that particular company.

To calculate the average price paid for a particular share you add up the total amount you have paid for the shares and divide that by the number of shares you have bought in that company. 

The answer is the average amount that you have paid per share.

Try this mathematical question:

There are five numbers 10, 20, 30, 40, 50

What is the average number?

The calculation: 

Add up the five numbers:  10 + 20 + 30 + 40 + 50 = 150

Divide the total of the five numbers (150) by 5

150 divided by 5 = 30 (answer)

You can do this easily with a calculator.

There are so many share trading platforms available these days that investing directly into the sharemarket has never been easier for the ordinary man and women.

So how does averaging work?

If you purchase stock at regular intervals you will pay different prices for each stock because share prices go up and down. Imagine if you bought something at the supermarket last week at the full price then bought the same item this week on special. The average price you paid for the item will be somewhere between the higher price and the lower price.

The sharemarket works like that. By purchasing a particular stock at regular intervals you will manage to pick up some shares in it when the price is lower. This is the advantage of saving regularly. 

In fact I think there is a case for purchasing more shares when the price is low. The average price paid per share is determined by calculations as explained earlier. 

The averaging strategy can also be used in cryptocurrency investing. 

Bitcoin is more volatile than the sharemarket so an astute investor who has an eye for a bargain can invest when the price has dropped.

There are so many share trading platforms available that playing the markets is accessible to everyone. I have joined two of them in New Zealand. Most countries have share trading platforms available. Signing up for them is easy; you require some form of identification. Just follow the directions and you are all set up.

TO SUMMARISE

Playing the markets requires a positive mindset and a cool head. If you have these you can profit from falling markets. Averaging is a method that takes advantage of falling markets. 

ABOUT THIS ARTICLE

Robert Stewart has a blog with other articles of a finance nature. Visit www.robertastewart.com Feel free to post this article on to your site, use it as part of your ebook, share it, print it, even sell it.

 

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Your goals and investment strategy

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

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

Your goals and investment strategy

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

SHORT TERM GOALS

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

MEDIUM TERM GOALS

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

LONG TERM GOALS

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

Lets look at some investment options.

SHORT TERM GOALS.

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

MEDIUM TERM GOALS

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

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

LONG TERM GOALS

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

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

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

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

ABOUT THIS ARTICLE

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

 

www.robertastewart.com

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Investing facts of life you must accept

Investing facts of life you must accept

In every aspect of life there are some cold hard facts that you need to get your head around. Investing your savings is no different. Here are seven facts of life when it comes to investing. Understand these and you will be better equipped to make better choices.

  1. Whenever there is a chance for a capital gain there is also a chance for capital loss

Whether you like it or not, if an opportunity for a capital gain arises then there is also the chance for a capital loss. It is easy to invest when all is going well and the money you have invested has grown but most of your capital gain will come when you are investing while others are selling. It requires patience and self control to stay with your financial plan when the markets are heading south. Your financial plan has to take into account the possibility of a bear market therefore, invest according to your timeline.

  1. It is time not timing which is the key to growing your wealth

The key to prosperity is to start saving early. Once you get into the habit of saving and investing from an early age then things will become easier for you years down the track. Saving a portion of your income means living within your means but that does not mean that you have to be very stingy. It means not frittering away your spare cash on items which are not going to help you financially in the long term. If you are on the verge of retirement or already retired then you have less time to recover from financial setbacks therefore cannot be as aggressive with your investing as the young ones but that does not mean that growth funds are out of bound but rather just balance your strategy depending on how soon you are going to use the money.

  1. Your investments are your responsibility

You may be using a financial adviser to deal with your investments but they are still your responsibility because an adviser cannot think for you; it is up to you to set your own goals which match your personal situation. It is then up to you to tell your adviser where you wish to invest your money. Some investors like to have someone to blame and during a market downturn the first person to blame is their fund manager. In the case of retirement schemes such as the New Zealand Kiwi saver, investors have the choice as to whether to invest their money in growth, balanced or conservative funds. If balanced funds are chosen then there is the choice of what percentage of your savings will be invested in growth funds. Balanced funds are a mixture of growth and conservative funds.

  1. Value is determined by what others are prepared to pay for

Have you ever stopped to ask yourself the question, “What will this be worth in x years time?” The answer is quite simple!

What gives something value is what others are prepared to pay for that item whether it is a painting, someone’s stamp collection, shares in a particular company, cryptocurrency, property, gold, or whatever. 

None of us can know for certain what the market will do, therefore we take calculated risks based on our knowledge and expectation. 

As with anything in life there is no guarantee but if you do your homework and put a bit of thought into your strategy then you can have a nice nest egg to call upon when you need the money.

  1. Life is one big pyramid

One fact of life you need to accept is that life is like a pyramid. Using sport as an example; few ever make it to the elite level, comparatively few that is compared to the numbers taking part. It is the elites who make the most money, then as you go down to each level there are more and more participants. At the grass roots level you will find the highest number of participants, these are the sports men, women, and children who take part in sport for no other reason other than the enjoyment they derive from their chosen sport. 

If you have the ability to make money from your sport then it certainly will pay to have a backup plan by adding another string to your bow.

As for investing, well, there can only be one Warren Buffet, Robert Kiyosaki, or Anthony Robbins. It is important that you be the best at being you and not try to be a second rate version of someone else. Your personal financial choices must be what is applicable to your own circumstances.

 

  1. Life is all about percentages

Most people have played the lottery and most of us whether we have played it or not have heard about the absurd amounts of money which some lucky lottery winners have won; sometimes running in the millions. There is something which you must understand and it is this; For every person who won the lottery there are countless thousands who have lost their money trying the same thing. This is also true of many aspects of investing. You may have heard about someone who made a killing on the share market, on bitcoin, or some other investment but you seldom hear of those who lost everything while trying the same thing. My advice to those who are thinking about taking on high risk investments is to only do so with discretionary spending money and not with your retirement savings or money set aside for a house deposit or a car.

  1. Life is a numbers game

In life you cannot expect to win every single time. That is unrealistic. But making mistakes is just part of the learning process. The fact is that the more mistakes one makes the more likely one is going to win. Some people avoided risk after the 1987 sharemarket crash having got their fingers burned during Black Monday. 

If you do not take risks then nothing may happen to you but then you will also miss out on some of life’s experiences. When it comes to investing you need to take some kinds, albeit calculated ones in order to get ahead of inflation and the cost of living, otherwise the value of your money.

www.robertastewart.com

ABOUT THIS ARTICLE

This article is of the opinion of the writer and is not necessarily applicable to your personal circumstances. Feel free to share this article. Users may also use the article as content for your blog/website/ebook.

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Investing-Making a start

Here is an article I found on one of my old USB sticks. Thought I would repost it if you have not seen it yet.

Investing-Making a start

You do not have to be rich to invest but you need to invest to be rich.

The key to developing a financial plan is to make a start irrespective of your financial position. So many people just want to bury their head in the sand and carry on as they have been doing for years, living from one payday to the next. Their only hope of getting ahead financially is to win the lottery. You can only start from the present irrespective of your financial situation. A savings plan starts with just the first dollar which you save. If you have absolutely nothing from your pay day each week and save one dollar this week then you are financially better off this week. Saving money becomes a habit and it is a habit well worth developing because in the long run it will make things easier for you. Think of your money as a seed, you have to sow it before you can grow it. People tend to come up with all kinds of excuses for not saving for their future. There is always something which has more priority, a new television, a holiday, debts etc.

In short such people are professional procrastinators when it comes to saving money, it is always something they intend to do in the future but never get around to it. Saving money or spending money becomes a habit and they are habits which will result in consequences decades from today. It is all very well saying “You can’t take it all with you” (when you die) but leaving your family in financial trouble when you die is irresponsible and selfish. You will reap what you sow therefore in order to reap a financial harvest when you retire, you need to sow into your retirement fund. 

Developing the savings habit when you have been a spender all your life is going to mean developing new habits such as doing without rather than borrowing for items you do not need and buying from thrift shops. It will take will power on your part, many people just do not have will power and will spend whatever is in their bank account and when the power, phone, or rates bill arrives in the mail, they don’t have the money to cover it. 

Setting up a retirement fund is a great idea for building up a future nest egg for your retirement years. The money is left to accumulate where you have no access to it which removes the temptation to spend it.

Money gives you options

Even if you had just one thousand dollars saved up you have more options than the person who has no savings at all, the person who has ten thousand dollars saved up has more options than the person who has just a thousand dollars saved. Options in terms of where to invest the money, where to holiday, and whether they can afford to move to another town for a job.

Advantages of joining kiwisaver

If you are wondering what advantages there are in joining kiwisaver then here are the main ones.

1–There are the $520 per annum tax credits. In order to gain the full amount of tax credits you must contribute at least $1,040 per annum to your kiwisaver account.

2-The employer contributions, this is at least 3% of your gross wages.

Other advantages are;

3-Having your funds locked away until your retirement removes the temptation to spend your savings.

4-Income received from your kiwisaver account will not be assessed as income by WINZ if you lose your job and are going on a benefit.

5-Having your money locked away prevents family members or so called friends from taking advantage of you.

Employees have the choice of whether to contribute 2%, 4%, or 8% of their gross wages into kiwisaver.

What happens to your kiwisaver fund if you die before you reach 65?

Your money is allocated to your estate in accordance with your last will but the government’s contributions will return to the crown. It is important for you to make out a will otherwise any money belonging to your estate could be reduced by legal fees and leave your heirs financially worse off especially if there is not enough money in the kitty to pay for your funeral. It is all about being responsible about your finances. 

The question should be “How will I fund my later years if I am unable to work?”

Kiwisaver could be your answer. Making provisions for you in later years is the responsible thing to do and kiwisaver is an excellent tool for achieving your financial goals.

www.robertastewart.com