“I just want to wait till things look better”.
The NZX50 holds the top 50 NZ shares and has returned about 25% in 2012. Wow, says everyone, maybe we better get invested !!
The other (better) way to buy shares is known as “averaging in” – buy 25% today, buy 25% in 4 months, buy 25% in eight months, and the final 25% in 12 months.
“I just can’t take the risk anymore.”
By focusing on safety, you can end up with insufficient funds to retire on. It will be better to work out your risk profile by using some sort questionnaire, and then investing accordingly. For example if you are a balanced investor with a time frame of more than seven years, you should have about 45% in bonds, 10% property, and 45% in shares.
Your exposure to shares will be less than half your money and in line with your attitude to risk. Provided you hold diversified low cost funds, are patient and disciplined, you should have no problems with future volatility, and “sleeping at night.”
“I want to live today. Who cares about retirement, I will just keep working.”
Big catch – you cannot rely on your health or the job market to allow you to work forever. It is just a matter of being prudent. Most of us who do some basic budgeting, make a plan, use common sense, can live today and save for tomorrow at the same time.
No pain no gain - or a little pain, and in time, success, or at least a feeling of reasonable financial security due to your accumulated savings.
“I don’t care about capital gain. I just need the income.”
If you only focus on income you will be limiting your investment choices and inevitably reducing diversification (which is free).
“But this stock/fund/strategy has been good to me.”
We all have a tendency to hold on to winners too long, but without disciplined rebalancing, you could see your gains disappear overnight. Any gain related to shares/stocks is a paper gain until you turn it into cash, or re-invest it in high quality bonds.
Some people say that compound interest is the 8th wonder of the world – if that is so, then rebalancing may be the 9th.
“But the newspaper said….”
Investing or selling out by the headlines is a real mugs game. The mainstream news media seldom runs to any depth, so is not a reliable source of information for the serious investor.
“The guy at the bar/my uncle/my boss told me…”
No one can give any advice of any real depth to anyone, unless they have a full knowledge of that person’s situation, and requirements. In addition advising on other people’s money (OPM’s) is another story altogether.
Imagine if you went to your doctor and he gave you a prescription without asking any questions about your health – you would think he was crazy and should leave immediately.
The “experts” who babble away with their knowledge are no different. What may be good for them may be the wrong thing for you.
“I just want certainty.”
Death and taxes are the only two certainties in this world – not available with investments or anything else.
You can get confidence in your investments though, by ensuring you build a portfolio using quality investments, the right kind of fund, and diversify widely .
“I’m too busy to think about this.”
There is no right time to do just about anything in this world, but in fact you don’t have to do much ;
- Find an experienced and qualified adviser who is independent
- Answer all his/her questions and give the full picture of who you are and what you want – that will only take you an hour and a half
- Let him/her design a plan for you that meets your requirements
- Take a couple of weeks digesting it, using a common sense approach, rocket science not needed
- Ask your subconscious mind to critique it for a few days too (answers might come at 3 a.m.)
- It won’t take you a long time, but the long term outcome and gains might be quite dramatic
- The alternative is to arrive at age 65 when will be too late to change a lot, and the cost of your lack of action may be very painful
- Fail to plan – plan to fail.