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Ten tips for investing in shares; Is asset management just a lottery?; Why risk free can be risky; Debunking Obamapocalypse; ROI on university

Posted in Personal Finance

By Amanda Morrall

1) Tomorrow is a blank canvas

Aussie stockbroker Marcus Padley, writing for the Sydney Morning Herald, offers 10 tips for investors buying shares. I think some would take issue with No.3 about never buying a stock falling in price. Depending on the company, its managers, goals and product, many would argue that buying stock at a discounted price is not a bad thing in the long-run.My favourites are No.5 and No.7. 

Five: Humans are not natural investors. We need mechanisms outside the ramblings of the brain to protect equity investments - unemotional triggers and systems - because our natural triggers of fear and greed are useless.

Seven: There are no crystal balls. When it comes to tomorrow, financial theory tells you to look at history and project it forward. That's rubbish. Tomorrow is not a reflection of the past but a blank canvas.

HT to SR.

2) Luck or skill

The Harvard Business Review revisits the issue of active versus passive fund management styles and how to judge whether your manager has skill or just got lucky.  Track record is a key indicator in this matter. It is early days still in KiwiSaver but long enough that some patterns are emerging. You can study the year-to-year performance of your fund by looking at our data here.  Interest.co.nz senior analyst Craig Simpson has also written some excellent reports on individual KiwiSaver provider performance over the past few weeks. You can find them by searching our site with the key words Simpson and your fund provider.

3) Is risk free really risk free?

Motley Fool investment analyst Scott Phillips, writing for the Age newspaper, breaks out the charts and calculator and shows why staying invested in low risk cash investments, can be risky to your long-term wealth. That's because despite the downturn, shares have "thumped" returns on cash over the past three decades. Phillips shows what would have happened to A$10,000 invested back in 1982 under three scenarios; in short a $150K to $180K gap.

4) Bad bet against Obama

 

David Milstead, writing for the  Globe and Mail, explains why gold hungry investors predicting the collapse of the U.S dollar and end of the world under Obama's reign, could be crying in their wheaties this morning. Despite the challenges ahead, Milstead argues the deficit will shrink and the U.S. economy will come right, eventually.

 

5) Tertiary payoff

 

Also from the Globe and Mail, personal finance editor Rob Carrick talks to Christine Tausig Ford, of the Association of Universities and Colleges in Canada about the return on investment for those who decide to pursue a college or university education. Ford said college and university grads earn on average (over their working lives) C$1.3 million more than those who only receive a high school education.

 

Research comparing incomes of high school graduates in New Zealand with those who go onto tertiary is similar. According to this Statistics New Zealand report,  students completing a university degree earned on average 51% more than those with a level 1 to 3, upper secondary level equivalent, three years after completing their studies.

 

Here's some other interesting fun-facts from the report.

 

For young domestic students last enrolled in tertiary education in 2003, median annual  three-year post-study earnings were:  

  • 30 percent higher for those with a bachelor’s degree compared with those with a diploma. 
  • 16 percent higher for those with a diploma compared with those with a level 1 to 3 certificate. 
  • 16 percent higher for those with a master’s degree compared with those with a bachelor’s.  
  •  46 percent higher for those with a doctorate compared with those with a bachelor’s. 
  • Young students who completed their degree earned 29 percent more than those young students who left without completing their  degree.  
For those curious to know pay levels associated with degree types, here's some information via Fairfax.
 

To read other Take Fives by Amanda Morrall click here. You can also follow Amanda on Twitter @amandamorrall

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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5 Comments

I moved into cash six months

I moved into cash six months before the 2007 crash and advised all our employees of the share market risk at that time. Some moved out of shares and some did not. Those who did not got creamed with negative returns for several years and those in evil fixed cash made actual positive returns - even after fees.
 
But should project from that either that I will stay in cash for the rest of my life - or - that cash is somehow a poor choice?  Of course not.

As someone who has only high

As someone who has only high school qualifications I am all in favour of education.
 
However.
 
The things that are most important in life and those skills required for material success are not taught in schools or universities.
 
In my limited experience the most important thing for young people of any educational level early on is to find a work place that provides an opportunity to learn.  The more and the wider the better.  What they learn in the begining will have a large bearing on what they earn later on.
 
Unless their ambition lies in closer shop professions whether they have a degree or not will be of lessor importance.

#2 I worked for a fund mgmt

#2 I worked for a fund mgmt company in London for 4 years.  On average most fund managers perform about as well as a passive index tracker, yet they still charge you for the privilege. Of course there are a few Buffett-ish managers out there, but even they can be wrong on occasion.

For people like me though that find the sharemarket as boring as watching the tide come in and out (sharemarket goes up, sharemarket goes down, repeat) it's probably just easier to pay it into a super scheme (before tax) and let someone else have a crack at getting a return.

I am pretty gloomy for the

I am pretty gloomy for the next couple of years Negative Europe, Negative China in 2014 , Negative USA with no focus on paying debt.  The best investment is to follow Starfish1.

... and on a brighter note:

... and on a brighter note: I'm off to see the eclipse. From a boat. Parked on the reef for a week.

See you on the 19th!