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Lead yourself to wealth

The best bit of moneymaking advice I have seen lately came from an investment expert who warned that the best way to make money is to ignore the news. Of course, if the news says there will be a market crash before the crash actually happens, then he would be wrong, but generally the news fails to deliver brilliant prophecies.

What the guy was saying was that if you have a great investment strategy, the news could distract you big time. I have seen calculations that show time in the market is easier to do than trying to time the market. They also show how it can kill your returns if you’re out of the market on the big rebound days, which often come when we’re at our most scared!

The Law of Process

I saw a great story that teaches us all a very important wealth-building lesson. It came from John Maxwell’s book The 21 Irrefutable Laws of Leadership, where he tells a story of Anne Scheiber who died at 101 years of age in 1995 in New York City.

She had retired as a low paid employee at the IRS, which is our ATO equivalent in the USA. She was a lawyer but was a victim of female wage discrimination and retired at age 51 on a salary of $3150 in 1943. She lived in an old, dilapidated, $100 a week apartment in Manhattan. She didn’t buy newspapers but went to the NY public library on Saturdays to read the Wall Street Journal.

This was not a great life however this woman left the Yeshiva University $22 million!

How did she do it? She kept the Law of Process, as Maxwell calls it.

When she retired she had saved $5000, which she put into stocks. By 1950 she used her profit to buy 1000 Schering-Plough shares valued at $10,000.

By the time she died, because of dividend re-investment and stock splits she had 128,000 of the companies’ shares valued at $7.5 million.

She stuck to her knitting through thick and thin — her investment strategy. She didn’t say, “that will do, it’s time to cash out”. No, she stuck to her plan and it’s only a pity she didn’t enjoy a bit better life but she certainly proved that if you stick to stocks they do deliver. However, they have to be quality stocks and I prefer good dividend payers as over half of the return on shares comes from dividends.

The daily agenda

The moral of this story is get a great plan and stick to it and by the way, buy quality property and save in fixed deposits when they yield great returns and one day you might do an Anne Scheiber. Success comes out of a daily agenda and it should be driven by your priorities, passion, abilities, relationships, attitude, personal discipline, vision and influence.

If you want to build wealth, you have to lead yourself to change yourself to be committed to growing your wealth. However, it’s easier said than done and that’s why some people employ a good adviser to drive the process but it’s always better when the client is involved and engaged. That’s true of everything.

Top 10

Recently I looked at the top 10 reasons for not investing in shares. So, here are the top 10 reasons:

  1. There are so many negative factors — more than at any other time any of us could recall — that could cause a crash.
  2. The debt concerns in Europe look insurmountable.
  3. The US debt predicament could result in default.
  4. The US economy, even if it gets through its debt impasse in the Congress will be lucky to grow by much when the Yanks start repaying their debt.
  5. China is a bubble that could burst and drive us into a Great Depression.
  6. The US economy may go into a double dip recession this year.
  7. Problems in oil-producing countries could drive up the price of oil and cause a global recession.
  8. Interest rates look really attractive in fixed deposits and so why worry about stocks?
  9. The stock market is always prone to crashes and it’s just too unsettling for me and other assets are better, such as property.
  10. I don’t trust hedge funds, short-sellers and financial institutions that manipulate everything to their own favour at the expense of small investors.
Now ignore the top 10

Okay, there are my top reasons for not buying stocks and I reckon you should ignore all of them. The facts are that stocks, bought properly and managed wisely are a great way to build wealth. There are old clichés about investing in shares and while they can occasionally not work out, they have stood most tests of time.

All you have to do is change yourself, get a great investment plan or strategy and stick to it — it’s the Law of Process that will build your wealth over time and even while you are sleeping!

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Wednesday, July 27, 2011

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