NFA GRS basics
This article is not financial advice it is intended for general use and I have no idea about your systems or personal circumstances. Feel free to use the plans and framework to evaluate your decisions but I have no idea why you would.
Tools to Achieve Autonomy:
Savings 90-120 days cash or close to cash. o This feels like freedom o Should be separate from vacation plans. Once this amount is achieved it is fine as an emergency fund not a holiday/vacation fund. It can overlap with investments.
Insurance: “Because we are all temporarily abled” o Income or disability o Life (maybe not depends) o Health (depends) o Home etc…
My personal view is that your house is not an investment unless you are willing to sell it and move into a tent. I like houses I have owned houses for years but I have lost money on 3 of the 4 houses I have owned. o Real estate
- Renting is better than owning unless the home has 5% appreciation a year (NZ has lately) • Sunk Cost fallacy •Opportunity Cost •One house is a tremendous feeling of security and psychological value but it still isn't an investment unless you are willing to sell it.
‘How much is your time worth? New Research Calculates Cost of Performing Household Chores: the Economics of Garlic” WSJ Jane Spencer •If you don’t account for your time and hours worked every investment and "side hustle" looks amazing. •If you are an average plumber and could be working for 150-250 per hour what did it really cost you to be a landlord? •Travel, insurance, rates, damage etc… Real Estate - Can be bought as a security STOCK, Real Estate Investment Trust R.E.I.T NEW ZEALAND's tax system makes real estate, businesses and AUS/NZ stocks an incredibly enticing proposition but real estate and owning a business still sounds like work and you should be paid for your time.
-You can’t sell 50% or 22.3% of your stake in a house like you can in a stock, MF or ETF
-Illiquid, 6% cost in realtor fees to sell the asset in a block.
-This is a MOAT. (in the US there are current lawsuits in relation to the realtors and moats).
-It is hard to move a house.
Investments - Assets come in two forms appreciable or depreciable
For many people, their brain or skill set is their asset especially if they can trade those skills for money.
Learn or Know what an asset is versus what a liability is. Cars, boats, coins and gold are rarely as good as publicly traded companies. -If you get good enough at buying or selling high-end cars that you are making a profit it is more likely a business, not an investment and you probably are applying the "side hustle rules" of not paying yourself for your time hence why it looks profitable.
Understand a BOND ~ US Treasury, UK Guilt, all bonds often not available to retail investors -You loan someone else money so they can use it to do something Flavours and tax consequences are wide.
Stocks -You own a portion of a company that sells products to a consumer or another company.
Two major pathways to change here someone "smarter" does it for you (insert the whole financial services industry) or you develop the skills and tolerance of an amateur investor.
Someone Smarter Does it for yourself. ETFs and Mutual Funds – you pay a cost for a money manager to do it for you.
Pay someone to do it for you I did for 23 years the plan works but it cost me over 250K in fees and way more in cherry consensus. Warren Buffet “We pay a hefty price for a cheery consensus”
ACTIONS: Just Do It Automatically ▪ Set up payroll deduction for at least the Kiwi Saver, in the US I had IRAs, and college savings plans.
Decide to live on a little less and pay yourself first (KiwiSaver) Be picky about your financial advisor There is RISK of loss, the company going out of business and fraud besides just the required advice. ▪Are you going to a Fiduciary or a Salesman?
NZ everyday Investor podcast interviews tons of interesting guests some very alternative views and some politicians, bit of business I like his interviews but have no recommendation on his services. I would assume he is a financial advisor in the salesman category not a fiduciary. He has some very mainstream advice and fringe ideas.
-Do it automatically
-It is easier to understand what a company you use (perhaps are addicted to) does and how it makes money than how a fund manager or bank says it is protecting your money.
There are rules that the advisor, and fund manager have to follow and understanding what your accountant or tax advisor does may be more important.