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5 Ways to Diversify your investments

5 Ways to Diversify your investments

To have a diverse portfolio means to have your money in several places so that if one company or industry is in trouble then income from your other investments should at least minimise the shock.

There are 5 ways to diversify your portfolio. 

Number 1: Invest in several industries

Investing in different kinds of industries protects you from a downturn in one. With the online share market platforms I am with I have investments in a building company, an energy company, a farming retailer, phone company, and a New Zealand milk supplier. This diversification technique minimizes risks and gives me plenty of interest too.

Number 2: Invest in several funds

If you invest in managed funds and that includes everyone who is in Kiwisaver then you will be in various types of funds; growth, balanced, or conservative. The best strategy is to invest in the fund which is right for you and that depends on how soon you need the money. Long term, medium term, and short term money should be in growth, balanced, and conservative funds respectively but it all depends on your risk profile.

Number 3: Invest in different platforms

Most of us have heard of the online investing platforms such as Sharesies, Hatch, Investnow, Kernel Wealth, and Robinhood. Investing in several different platforms will help cushion you against the shock of having one of them fail, and certainly, there is no guarantee that this will not happen. I advise not investing all of your life savings into one online platform.

Number 4: Invest in different asset classes

Investing in different types of asset classes will enable you to withstand a downturn in one class of asset. Investing in fixed term interest, the share market, gold, and property are all different types of assets. It all depends on what the right kind of assets are right for your kind of personal circumstances. 

Number 5:Invest in different companies

This is very important. It is unlikely that all of the companies will fail even though the industry is going through a bad patch. This rule is just as applicable to investing in finance companies for a fixed term return as it is for shares. 

Benefits of Diversification

The number one benefit of diversification is it reduces your portfolio risk. If you placed all of your eggs in the one basket then you could lose it all if that one company went under and it did happen to some investors during the 2008 Global Financial Crisis (GFC) and 1987 Sharemarket crash (Black Monday).

It can be enjoyable for investors to own a little bit of a number of countries. Micro investment platforms such as Sharesies, Hatch, and Robinhood make this affordable for Mum and Dad investors.

Downsides of Diversification

Diversification can be time consuming but then everything worth doing is worth doing well. Investing in managed funds or mutual funds as they are called in the US is an option for busy people. More transaction fees and commissions is another downside to diversification and that could reduce your short term gain.

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.

 

Sharesies is an accessible and straightforward way to invest in the stock market. You can get started on your investment journey and start building your wealth. However, before making any investment decisions, it is essential to do your research and seek professional advice if necessary.

 Join Sharesies here

Disclaimer: I may receive a small commission if you sign up with Sharesies.

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Investing in Gold

Investing in Gold

Written by R. A. Stewart

Is Gold a good investment?

That is a question I cannot give you an answer to because it is a bit like a “How long is a piece of string?” question.

Whether investing in something is good or bad really depends on your personal circumstances and where this investment fits in with your objectives.

Is the money/investment needed in the short term, medium term, or long term?

Once you have answered this question you will have a better idea of whether gold is a suitable investment.

Problem with gold is…

That it does not provide investors with an income. All they can expect is capital gains; that is, selling gold at a higher price than when it was bought for.

The Share market provides a dividend to shareholders of the various companies and there is the opportunity to profit from the increasing value of the shares. 

Another problem with holding physical golds is the storage costs and this can mitigate any capital gains from selling it.

Different ways of investing in gold

There are several ways of investing in gold and there are pros and cons with each of them.

The easiest way of investing in gold is to purchase shares in a gold mine but this is very risky and should only be done with money you can fully afford to lose. Your country’s stock market may have listed companies of gold mines.

Purchasing gold coins is another way. You will find gold coins listed on ebay but the downfall of investing in gold in this way is that the seller will seek the highest price possible for their coins; and it may not reflect it’s true value.

Buying gold from a dealer is another way but this is beyond the means of a lot of people and then there is the problem of storage not to mention the risk of theft.

Collecting gold jewellery is another way of investing in gold. Just as collecting other items such as postage stamps, old comics, or barbie dolls, they give enjoyment to the collector and the items are worth something when it comes time to sell.

Investing in gold as an interest

Gold can provide an added interest to your portfolio. If you have discretionary money to spend then investing in gold can add an extra string to your financial bow and if the investment turns to custard then there is no damage done. After all, millions of dollars are lost in lotteries every year and no one blinks an eye lid. Giving up lotteries and use the money to build up your gold investments should be your best approach. 

The risk of investing in gold

There are risks with investing in Gold as there are with other types of investments but these risks can be managed. It is important for investors to do their research in order to understand these risks. 

Investing in gold should not be an alternative to contributing to your country’s retirement scheme.

The rules of investing

The rules of investing are just as applicable with gold as they are with other types of investments. Where does gold fit into your overall investment strategy? If you have some disposable spending money to invest then investing in gold is a good option. It will provide an added interest to you; that is interest in terms of enjoyment such as a stamp collector would derive interest from his or her hobby.

It is certainly not wise to just purchase gold with money which you can ill afford to lose or to invest your whole life savings into it. That is just asking for trouble. 

To summarise

Investing in gold can provide you with an interesting string to your financial portfolio, but it does have its pitfalls. It is important to weigh up the pros and cons and only invest money in gold which you can afford to lose. Read up on the subject and then decide whether gold is a suitable investment for you.

About this article

The opinions in this article are of the writer’s opinion and may not be applicable to your personal circumstances. You may use the content for your blog/site or ebook. Feel free to share the article on social media.

www.robertastewart.com

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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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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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5 things you should never borrow money for

5 things you should never borrow money for

Written by R. A. Stewart

Holiday Travel

This is a complete no no because once your holiday is over you have nothing to show for the money which has been spent on it. Before overseas travel is considered it is important to think where in the scheme of this could that money be better spent as far as your goals are concerned. Other debts such as a mortgage, car repayments, and hire purchase repayments must all take priority and this is where any surplus cash should go. To go on holiday while having these debts hanging over your head is completely irresponsible. If this is you then you are heading for financial hardship.

Cryptocurrency

I have said it many times previously; “Only purchase cryptocurrency with your discretionary spending money.” In other words, money which you can fully afford to lose. Money which is set aside for household bills such as the rent/rates money or power should not be used for purchasing cryptocurrency. If you bought bitcoin and lost it all, would that cause you undue hardship? is the question which will determine whether you should go ahead with your purchase. It is also worth remembering that cryptocurrency wallets can be hacked and you can also lose money this way. It is also a good idea to point out that investing in cryptocurrency should never be a substitute for investing in your country’s retirement scheme but rather is something treated separately.

Electronics (TV, Laptop, etc)

There are items which are classed as needs and wants. Needs are things such as rent, power, food and grocery items, car expenses, etc. Wants are luxury items which should only be bought with discretionary spending money. Borrowing money for household goods is called consumer debt. You are borrowing money for items which lose their value over time. If you are borrowing money to pay for your needs then there is something seriously wrong with your household balance sheet and making an appointment with a budget advisor is the first step toward getting back into the black.

Furniture

As with other consumables you should never borrow money for household furniture. It is better to pick up cheap stuff from a charity shop than to go into debt for the sake of impressing your peers with nice stuff which is what you are basically doing. Some folk are so focused on accumulating stuff rather than accumulating assets that they never get around to achieving any kind of financial success because there is always something they want to buy. Once something is paid off they look for something else to buy on credit. It becomes a never ending cycle of debt and in the long term all of the interest payments add up to a huge sum of money.

Pets

An absurd amount of money is spent by some pet owners per annum; namely dogs and cats. It is one thing spending your discretionary money on your hobbies and pet ownership is one, but it is another to use borrowed money to pay for it all. I have seen some people spend a lot of money on vet bills for cats and dogs when the sensible thing to do would be to have the animal put down. I was told of someone who spent a grand on vet bills for a cat only for it to die a few weeks later. Now you have to think what would you have done with that kind of money? It could have been used to pay off a mortgage if you have one or some other debt, or have been invested into some mutual funds. 

We all have a choice to spend whatever discretionary income we have and each choice has different outcomes, therefore the trick is to invest your money into something which will give you the best kind of outcome for your personal circumstances.

www.robertastewart.com

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Investing mistakes

He who never made a mistake…

never made anything.

You could read all you can about the sharemarket 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 privatised 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 consumerable 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 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 judgment.

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.

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.

Online Business Opportunity Work From Home

I would like to introduce you to an online business that can literally change your life and help you make a full time income working from home. This same system has helped 100s of people with their financial goals whether it’s to just make some extra money on the side or start a fulltime business. The best part is anyone can do this and the cost is nothing when you compare it to the money you can make. Click on this link here – http://bit.ly/3uQXf7I for details.

www.robertastewart.com

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HOW TO GAIN FINANCIAL LITERACY

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 judgement 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 sharemarket 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 way 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 has 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. 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

ABOUT THIS ARTICLE

Feel free to share this article or post it on your site. You also have permission to use it as content for your ebook. My blog www.robertastewart.com has down to earth information about everyday finances.

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GETTING YOUR FINANCES IN ORDER

Saving for whatever…
Written by R. A. Stewart
Establish your savings goal. Are you saving for your retirement, a new car, a deposit for a home or whatever. This will be the determining factor when choosing where to invest your money. It is important to note that you can have several different savings/financial goals at the same time with a different type of investment with each goal.
For example, you may have a short term goal to pay off your TV set, a medium term goal to save for your car, and a long term goal to put away money for your retirement.
Your financial goals should be split up into three categorys; short term, medium term, and long term.
The category will determine where it is best to place your money.
1. SHORT TERM
Oncall-6 months
This is money on standby and used for general household bills such as power, car running expenses rent, and so forth.
Where to keep this money; Ordinary savings account or bonus bonds
2. MEDIUM TERM
6 months-3 years
This is money being saved for a car, appliance, overseas trip.
Where to keep your money; Bonus Bonds is a good option but mutual funds is an option but invest conservatively.
There are a number of managed funds which are cropping up and you do not have to have much to get started with them. A good one for the beginner is sharesies (in NZ). If you are from another country there will be companies similar to Sharesies you are able to invest with.
3. LONG TERM
3 years+
Saving for a house deposit and building a nestegg for your retirement are examples of long term goals.
Where to keep your money; kiwisaver is an ideal investment to drive you to your savings destination because the incentives will help your savings grow.
Some tips.
Pay off debt first because if you are able to pay off a debt where your are paying say 10% interest on the debt then the interest saved from the paid off debt is just as if you had been paid the 10%; as the saying goes, “A dollar saved is a dollar made.”
Stuff happens in life where circumstances change therefore you need to be prepared to be flexible.
Take a long term view of your investments. It is time and not timing which is the key to investing. As you gain more experience with investing, your risk profile will improve.
Read all you can about finance and the sharemarket. Knowledge will help you overcome your fears when investing.
PLEASE NOTE; The information in this article is the writer’s opinion basnk.ed on his experience. If you requiire financial advice see your bank.
www.robertastewart.com