Category Archives: Tips

Bitcoin and other virtual currencies: Investment or gamble?

The purpose of this article is to highlight important aspects that investors must consider as virtual currencies have clearly become the new “flavour of the decade”.

One of the first questions a potential “investor” should answer is, “Why do I want to invest in Bitcoin?” If the real answer is, “I want in on the action and to make a lot of money like everybody else!”, be very careful.

This may be the greedy part, that lies hidden in all of us, driving you towards putting some of your hard-earned money into virtual currency, which may very well have shown spectacular returns up to now. However, before you part with your money, based on past “performance”, consider this statement by Benjamin Graham, author of The Intelligent Investor:

“While a trend shown in the past is a fact, a “future trend’ is only an assumption.”

How many investment schemes, which have all promised extraordinary high returns in the past, have eventually exploded in the faces of people who could least afford it – even recently? How many times do we say after losing our money, “I should have known! When something looks too good to be true, it probably is”? Will history repeat itself as thousands of people, some of them even registered financial advisors, buy into, and express “expert opinions” about investing in virtual currencies such as Bitcoin, Darkcoin, Peercoin and Feathercoin? Again, Benjamin Graham warned:

“Those who do not remember the past are condemned to repeat it.”

World famous investor and investment manager, Warren Buffett, thinks coin offerings will end badly. “People get excited from big price movements…,” he said. Buffett remains sceptical, saying: “You can’t value bitcoin because it’s not a value-producing asset.” He added that there’s no telling how far bitcoin’s price will go and described it as a “real bubble in that sort of thing.” [See  this link]

Jacques Plaut, Portfolio Manager, Allan Gray Equity Fund wrote: “We are always looking for good ways to preserve capital and earn returns for clients. We do not think bitcoin is an instrument which will enable us to do this… “I see some similarities with previous bubbles, but all the signs are not yet there.” Neville Chester, manager of Coronation’s Aggressive Equity strategy explained: “Bitcoin generates nothing. It is a speculative investment in that the value of a Bitcoin is determined only by the price someone else will want to pay for it.”

According to National Treasury, the Financial Services Board and the Reserve Bank, while virtual currencies can be bought and sold on various platforms, they are not defined as securities in terms of the Financial Markets Act. Bitcoin and other virtual currencies are not regulated, and Treasury has clearly stated that there are no specific laws or regulations that address the use of virtual currencies and consequently, no legal protection or recourse is afforded to users of virtual currencies.

According to Anton Swanepoel (financial services industry thought leader, speaker and author), “I have seen more than my fair share of hype in the financial services industry over the last 28 years to get very nervous when I hear how many people are buying into these currencies. It is during times like these that Warren Buffett’s advice comes to mind:

‘Be fearful when others are greedy…'”

So – are cryptocurrencies an investment or a gamble? At this point, they are a gamble.

The power of positivity and a good plan

Have you ever told yourself, “When I have more money, I’ll be happier”? How about, “I’ll never be able to pay off this debt”? These sort of toxic money thoughts are holding you back from financial success – and happiness! A good financial plan needs to be attainable and measurable, those expressions are neither.

The first step to a financial plan is both the hardest and the easiest – it’s the starting point. The point where you measure how deep you are so that you can calculate what you need to do to get where you want to be. Measuring your budget is usually a huge relief for most people, your finances are no longer a mystical figure floating in the ether, you have defined an attainable and measurable goal.

You need to rescript your brain into thinking positive and actionable thoughts. Here are some tips to help you along your way:

Get good advice
Getting good advice and being reminded that what we want to achieve IS attainable does wonders for an attitude of success. However, you will also need to keep your end-goal in mind.

A good way to do this is to pick out a positive phrase that acts as a sort of rule-of-thumb. For example, “Is this [potential purchase] better than a family vacation / new car / bigger apartment?”

Don’t Rush
One study showed that the farther away a goal seems, and the less sure we are about when it will happen, the more likely we are to give up. Consistency is key.

Use numbers and dates to measure WHEN you want to achieve your goals by. And work out some smaller, short-term goals along the way that will reap quicker results. Paying off debts or saving a certain amount, for example, can leave you with a great feeling of pride and accomplishment. This increases the likelihood of you keeping up your good financial habits.

Dig in your heels
Not next week. Not when you get a raise. Not next year. Get started today – and don’t let up!

Need some good advice? That’s why I’m here. Let’s get in touch!

Common financial mistakes in your thirties

Saving in your thirties becomes increasingly difficult as your financial responsibilities increase. However, sound financial decisions during this phase of life can have profound benefits at a later stage.

Here are some common financial mistakes to avoid:

  • The first is failing to draw up a budget. A proper budget is the starting point of all financial discipline and should be physically written down for later reference. Include your partner in this process as it is important to ensure that you are both on the same page.
  • The second mistake is do too much too soon. Before investing you need to have accumulated enough savings. It is vital to have an emergency fund, which must have sufficient reserves to cover at least a couple months worth of expenses. This should protect you from a debt spiral in the case of an emergency.
  • The third mistake is accruing bad debt. A loan to buy a house is considered “good” debt. Bad debt is using credit to finance furniture, electronics, appliances, vehicles and other items that devalue over time.
  • At the age of 30 retirement may seem like it is still a long way off, but it is important to start contributing to your employer’s pension fund or a retirement annuity. You should try to contribute at least 15% of your gross monthly salary, there are significant tax benefits to such a strategy.
  • It can be easy to fall under the illusion that bad things only happen to other people. Make sure you have adequate life insurance, dread disease, disability and medical cover.
  • Another common blunder is to contend that wills are only for the elderly. Draft a will, review it regularly and don’t forget to tell your loved ones where to find it.
  • Life insurance is important if you have dependents. It is imperative to ensure your dependents will be in a position to maintain their current standard of living if you pass away. Determine the exact amount of life insurance you need and review your cover regularly as your financial needs change
  • Finally, at this stage of your life, you still have a long way to go to retirement and are in a position to take on more equity exposure. It is essential to get proper advice with regards to your investment decisions.

Need some assistance? Let’s get in touch!

Source: www.moneyweb.co.za

Another 5 Financial Reflections for 2016

Looking forward to another year of financial success means embracing monetary mistakes of the past. More importantly, you need to be honest with yourself about where you currently are and where you want to be.

Here are another 5 Financial Reflections from 2015, for 2016:

Don’t let yourself be pressured into buying designer goods
Branding is such a huge part of the modern consumer society, yet there are generic products that deliver exactly the same level of quality. Buying high-ticket items might make you feel good about yourself in the short term, but in the long run your frugality makes more sense.

Learn to say you’re broke when you are
There is no shame in admitting this, especially when you consider how many people are living above their financial comfort level on credit. If your friends want to go to an expensive restaurant, don’t be afraid to suggest a bring-and-braai at your place rather; or delay the excursion until you have sufficient cash flow available.

Make the most of what you’ve got
Scavenge your wardrobe, some of the clothes that you haven’t been wearing are probably still in good nick. Check to see what you have before rushing off and buying new stuff. Fix things that are broken, reupholster, add a fresh coat of paint, and if all else fails look for second-hand bargains.

We live in a throw-away culture, avoid ostentatious display and appreciate the small things in life.

Be honest with yourself about wasting money
You can easily lose hundreds of rands on buying coffee every morning, going to convenience stores regularly and not eating the food in your fridge before it goes off. These are avoidable expenses that don’t need to be completely eradicated but can definitely be reduced.

By lowering your costs on daily commutes, meals, conveniences and personal luxuries you could quickly accrue a sizeable emergency fund.

Only use credit for emergencies
First, you need to consider what you define as an emergency. A malfunctioning gearbox, a burst water heater, a sudden visit to the doctor’s office. Once you start buying everyday items, such as groceries, on credit there should be warning lights going off in your head. Don’t think of credit card limits and overdraft limits as your money, it’s the bank's money that you’re using and it’s best not to forget it.

Turn your reflections into resolutions and forge a firm financial future for 2016.

In need of financial advice? I can help you out. Let’s get in touch!

Source: fin24