You don’t need to have any starting qualifications to improve your financial education. All you need is the will! And that won’t cost you anything.
Financial education ranges from everything relating to understanding how interest and compounding interest works through to buying and selling on the futures market.
Don’t get bogged down in the terminology. Investing involves a lot of common sense, but a bit of education will really accelerate your financial successes and reduce your chances of large losses.
To educate yourself, you can start with the following:
- Read some books about investing, such as:
- George S Clason. 1926. The Richest Man in Babylon. Penguin Books.
- Dolf de Roos. 2001. Real Estate Riches: How to become rich using your banker’s money. Warner Business Books.
- Anne Hartley. 1990. Financially Free: Think rich to be rich: a woman’s guide to creating wealth. Doubleday Australia Pty Ltd.
- Martin Hawes. 2006. Twenty Great Summers: Work less, live more and make the most of your money. Allen & Unwin
- John Kehoe. 2006. Mind Power into the 21st Century: Techniques to harness the astounding powers of thought. Zoetic Books.
- Liz Koh. 2008. Your Money Personality: Unlock the secret to a rich and happy life. Awa Press.
- Robert Kyosaki and Sharon Lechter. 1997. Rich Dad Poor Dad: What the rich teach their kids about money that the poor and middle class do not! Warner Books Ed.
- David Schwartz. 1959. The Magic of Thinking Big. Wilshire Books Co.
- Thomas J Stanley and William D Danko. 1996. The Millionaire Next Door: The surprising secrets of America’s wealthy. Longstreet Press.
You will find many of these books in your local library.
- Read the websites of companies you are interested in. In particular, have a look at their annual report – there is usually a lot of commentary to accompany the financial statements so you won’t get bogged down in numbers. You can also check the Investor Relations section on their websites for further information and the NZX for company announcements.
- Read websites like this one or others about personal finance. A note of warning: there are a number of people making a living by creating financial information websites and filling them with content lifted from other websites. As a reader you may have no idea how valid the information is, so only read information from websites you have come to trust or from names of people who are qualified to comment.
- Sign up for newsletters from Financial Providers (if you can) and the wealth divisions of banks. These weekly commentaries will provide you with lots of analysis on different companies.
- Go to company AGMs – you usually need to be a shareholder to be able to attend, but members of the NZSA are generally invited (see the following point).
- Join the New Zealand Shareholders Association (NZSA). This costs around $145 a year ($45 for a student). There are branches in most large centres that run monthly meetings with speakers such as chief executives or Board members of companies you are likely to want to invest in. I went to a Wellington meeting in February 2009 when Rod Drury, founder and former CEO of the online accounting software company Xero, was speaking. Afterwards, almost everyone who attended bought shares in Xero at around NZD1 a share, and no one has regretted it – the same shares are now selling at around NZD140.
The NZSA also run occasional education seminars for a minimal cost and may put together a course for you if you can get enough people to come along. The courses are run by experienced volunteers.
The NZSA has a share game that you can ‘play’ when you become a member, practising buying and selling shares virtually. It costs only $20 to play.
The NZSA also provide research reports on companies for members through Shareclarity (an independent equity research company), which is a huge benefit given that this is one reason investors use AFAs.
- Sign up to Sharesies (an online platform that aims to make investing accessible and easy for all) which allows you to buy into ETFs or individual shares in New Zealand and the US (Australian shares available soon). You can put small amounts into Sharesies when you like, and you can choose which ETF or share to put your funds into. The cost is an annual subscription of $30 a year plus there are built in purchase and sale transaction costs. This is a great gift for children (or grandchildren). Other options are Hatch which only invests in US shares and Invest Now which only invests in funds.
- Sign up for Hatch’s share investing course Hatch Investing Guide
- Join a newsletter group, such as Sharechat. Subscribe for free to their newsletters, which offer news, tips and research on companies to invest in.
- Set up or join a share club. These were popular in the 80s until the 1987 sharemarket crash. Today’s share clubs are a lot more sophisticated and build on the syndicate principal, that is, that the more funds you have to invest, the more options you have and the lower relative brokerage fees per transaction. You can use the facilities and information from an online club, such as Voleo, to support your own shareclub or join one of their online ones.
If you’re setting up your own club, make sure you have solid rules, which all members of the club have signed up to, that clearly set out how someone can join, the number of people required to form the share club and whether new members can join or whether they have to buy out an existing member (remember that could be too expensive after a few years of good investment returns), the amount and regularity of contributions, what happens to dividends (are they reinvested or paid to members?) and how members can get their money out. Understand the tax implications of the arrangement.
- Complete some courses or qualifications in investing. You would probably consider longer courses or qualifications if you were considering going to work in the industry but completing a three year degree in finance is not necessary to become an investor or improve your financial knowledge. If you would like to keep your day job, then you will probably find short courses quite useful. You will find such courses being run by investor companies such as Craigs Investment Partners or individual AFAs, through community high schools, summer schools at your local university or through other organisations such as the NZ Shareholders Association (NZSA).
- Beware of taking too much advice from friends and family about the latest and greatest new investment – if it sounds too good to be true, then it usually will be.
- Consider joining the Angel Association New Zealand. This is an association that works with the early-stage investment industry. It can give you access to start-up companies and because its resources are pooled, you don’t need to put in a large amount of money.
- Study price earnings ratios and monitor individual shares if you want to take a technical approach.
- Read widely and generally, for example the business pages in the newspapers or online to help you better understand the general market and monitor trends. You can then use your common sense and understanding of industries to help you make individual share choices.
Like all education, your financial education will be life long learning and a mix of more formal reading and actually doing.
My book, Stop Worrying About Money – A simple guide to creating a financially sustainable life for you and your family, may be a good place to start!
The information in this blog does not purport to be financial advice and no reliance should be placed on it. It is of a general nature only based on my experience as a Chartered Accountant in practice and specific advice should be sought for your particular situation.