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Listing all posts with label Investing. Show all posts.
  1. Pay yourself firstIt is easy for us to understand that paying off debt makes sense but who would have thought that investing while paying off debt is also a great strategy?
    Let’s have a look at the reasons why saving while paying off debt makes sense:

    1.     By ‘paying yourself first’ you are paying your most important debt – an investment in yourself.  This creates a savings habit which sets you up for life.

    2.     You can start investing earlier and make the most of compound interest.  Starting earlier also means that you can take a more aggressive approach to investing as you have a longer time to accept the market dips and subsequent recoveries.

    3.     You will have money set aside for the future.  This could be for when you stop working or for any other purposes in the future. 

    4.     Money is available for emergencies.

    5.     If you decide to increase your mortgage to buy a bigger home you won’t need to worry about the ‘round to it’ problem (I’ll get round to it).  Your investments will be working for you!

    There is a common myth that you can’t start saving until you are debt-free.  After all, many people believe that you need lump sums of cash to really invest.  However, this is not the case.  Think about it like this: You don’t need to be rich to invest, but you do need to invest to be rich.

    Paying yourself first is a popular concept in Financial Planning circles.  The idea is that you have a set amount taken from your account each payday before you have the chance to use it for other purposes.  After all, you pay the power company for your electricity, the phone company for your communication services, not to mention all the other bills that you have.  Why not think about paying yourself a salary, aren’t you worth it?

    The question you may be asking yourself may be: “How can I invest when I only have a small amount?”  After all you have probably heard that you must diversify by not putting all your eggs in one basket – how is that possible with a small amount?

    And, where would you put your money to get the diversification in your investments that you need to spread your risk?  The answer to that will depend on your tolerance to risk, your time frame for investing and whether you need income from the investment.  Did you know that anyone can diversify by drip feeding investments for as little as $50 a month?

    Investing on a regular basis is a valuable way of growing investments and takes advantage of ‘Dollar Cost Averaging’.  This drip feeding strategy means that you make deposits when markets are low (gaining more for your money – effectively buying ‘on sale’) as well as when they are on the way up – making what you have already bought worth more.  And you don’t need to try timing the markets.

    When diversifying there will be times when you’ll wish that all your money was in shares or all in property or even in gold but over the long run you’ll be pleased to have it spread around – you’ll do better.
  2. Some time ago I read an interesting article by Michael Masterson about the various types of financial books and how to make the most from each of these books.  The article, written in 2007, was called “How to Read and Profit From Wealth-Building Books”. This is a synopsis of that article.

    Michael splits financial books into five types.  These are the categories he gives them and how you can make the most of each.

    Investment Books are usually written by share market (stock market) gurus who assume that you want to learn by investing in share markets.  The way to get the best from these books is to read until you find a strategy that you think is best for you.  Stick with this strategy as studies show that being consistent in your investing is a more important indicator of success than the strategy itself.

    Academic Studies are typically written by researchers such as Thomas Stanley's The Millionaire Next Door: The Surprising Secrets of America's Wealthy. These books describe wealthy people, what they do, and how they became wealthy. Michael’s own book, ‘Seven Years to Seven Figures: The Fast-Track Plan to Becoming a Millionaire (Agora Series)’, falls into this category.  Read these books for motivation. They remind you that to become wealthy you must do what wealthy people do which is work hard and save.

    Debt to Wealth books are often written by financial planners or advisers. These books encourage and guide those in financial trouble in the ways to control of their personal finances. Each author will have their particular way of providing this information but the books are designed to help create good habits.

    Scrimp and Save books are often written by authors who show how ordinary folk take advantage of strategies such as the "miracle of compound interest" by investing wisely over a long period of time. This particular miracle is best started when you are young.

    You Can Get Rich Too books are written by successful business people such as Donald Trump.  Don’t be disappointed to find that these books tend to have the same stuff about getting rich.  That is to say they advocate entrepreneurship and real estate.  Use these books to learn particular property and business building tips.

    Each book you read will give you something to take away.  Being a prolific reader is one key to the success many people such as Warren Buffet and Donald Trump share. We can all read books to increase our wealth knowledge base.
  3. More and more these days we hear of, or experience a disaster of some kind -- and it seems to be almost weekly.  There were the Australian floods, the Christchurch earthquakes, the Japan earthquake and tsunami, the various North African uprisings, Libya’s dictator and now the large Turkey earthquake.  

    No doubt, many investors will be asking themselves what they should do with their investments.

    The answer is simple: stick to your long-term plan. For most investors, this will mean sitting tight and doing nothing.

    In times of upheavals and uncertainty, there is always a temptation to do something hasty, but it should be resisted. Unless you actually need your money now, withdrawing is a kneejerk reaction, rather than a rational response.

    These are emotional responses…

     Emotion causes investors to panic during market dips or local economy shocks, become greedy when markets rise, follow herd behaviour, become irrationally attached to their investments, switch too often between funds and take on too much or too little risk. This behaviour has the ability to have a significantly negative impact on investment returns…


    Understanding and acknowledging your emotions and the influence they have on your investment behaviour is the first step to controlling them. Investors with certain personality types, such as confident alpha males, are often more prone to making emotional investment decisions. Unfortunately, these are often the very people who are least likely to acknowledge that that they are predisposed to doing so.


    The destructive power of emotional investing when disaster strikes by Rob MacDonald.

    Let’s take a look at what’s happening. There has been loss of life (which is absolutely tragic), there has been economic disruption and massive disruption of property. Oil prices have risen, currencies have become more volatile and share markets have reacted nervously and in many instances taken a tumble.

    The natural emotional reaction for many of you is probably to withdraw your money from various investments and head for the bank.  However, this could potentially be the wrong move.

    History shows there is every indication the markets will rebound – and even go on to reach new highs. However, by selling now, the most likely result is that you will take an immediate loss, at the same time creating buying opportunities for others.

    Sharemarkets by their very nature are volatile, and they can and do react swiftly to events – but that doesn’t mean investors should follow suit.

    It’s at times like this, investors need to keep their eyes firmly on their long-term strategies. As terrible as recent events are, retreating from the markets won’t help anyone – yourself included.

    During the next few days or weeks while there is uncertainty and confusion in the financial markets, the best response for investors is to stay focused and ride out the volatility.  If you are invested in good quality actively managed funds, then your fund manager is probably closely monitoring the situation and taking advantage of the opportunities that volatility creates. The manager will be looking at what stocks are likely to show significant growth  as and when the rebuilding phase commences and will have made a decision to purchase these stocks at a discounted rate. As always, talk to your financial adviser for specific advice relating to your personal situation or contact Lyn.


As an Authorised Financial Adviser in Christchurch Lyn Bell has passed the requirements of the Financial Markets Authority and is legally qualified to provide financial services to her clients throughout New Zealand.  

Lyn’s registration can be viewed at www.fspr.govt.nz. Lyn can also be found at the Financial Markets Authority website.

A disclosure statement is available free on request



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While every care has been taken to supply accurate information, errors and omissions may occur. Accordingly, Lyn Bell & Associates accepts no responsibility for any loss caused as a result of any person relying on the information supplied.