Concepts that are essential....
Being a successful share market investor requires a few concepts that needs to be understood and others to be learned. Those concepts will build confidence.
a. Financial literacy
b. Wealth creation - the roadmap
c. Systems approach to Retirement
d. Cross mapping between knowledge, risk, asset classes and available tools
e. Self-assessment and simulation of personal circumstances
f. Select quality shares against personal risk profile with confidence
g. Maintain the share portfolio
h. Trust the algorithm
i. Importance of dividend growth rate and price growth
We use diagrams to provide high-level overviews of each concept.
Financial literacy
Financial literacy is key for self-directed investors as it empowers them to make informed decisions and manage their investments wisely. Here are the 10 most important financial fundamentals to get familiar with:
Budgeting and Cash Flow Management: ................................
Wealth roadmap
The diagram attempts to depict the different stages in a person’s life while creating wealth. The age associated with the stages will be different for each person, but it gives something to work from. The risk you take will depend on your financial goals, where you are in your current personal life, your accumulation phase, and circumstances. We can draw the following theoretical stages in a person's life: ..........................
Structured approach
Do you use a systems approach to your retirement planning and investments?
Are you one of the 75% taxpayers that are self-directed DIY Investor, then using a financial planner tool will help to reduce the guess work.
As a self-directed (DIY) investor, you can understand, plan and manage your finances to achieve your financial goals like a pro. ..............................
Risk, Assets, Knowledge
A survey suggested the reason some people aren’t self-directed investors is because they believe it's like gambling; it's only for experts or don’t have enough time or money. The survey asked investors what their main underlying fears are.
• The top fear was the lack of financial literacy/education followed by paralysis by analysis/overwhelming of choices ..........................
Simulations
Using retirement planning tools and calculators only provides some of the information investors needed. Ever wondered why? Think about job creation. Who will benefit most by NOT providing the self-directed investor all the information needed?
However, using a combination of free/available tools can get you quite far. Far enough to make significantly informed decisions. How? .............................
Select Quality Shares
Using the right stock market tools allows for an easy selection of quality shares based on personal circumstances. Sharefinder 6 has a portfolio wizard feature that helps to identify and select quality shares according to specific risk levels. It cannot get easier than this. All you need to do is to a) select the level of risk analysis .........................
Share portfolio maintenance
The ShareFinder application has many smart features and makes this process easy. The SF6 Portfolio Analyser evaluates the selected shares and makes recommendations. Initially, once you have selected and purchased the shares, enter them into the Portfolio Manager. The Portfolio Manager will monitor the performance of the shares and make recommendations. That is smart and will save hours of work. ......................................
Trust the algorithm
In order to instil trust and confidence in any analytical tool, you need to understand the algorithm used behind the system. When grouping companies, using data analytics, interesting observations and phenomena, become visible across those groups. When companies start paying dividends, they may still go through their early growth cycle ....................
Correlation: Dividends and price growth
Companies that manage year-after-year an increase in their profits will attract shareholders by increasing the dividends they distributed annually. Thus, if a company continuously increases the dividend payouts for many years, it must be considered a well-managed company.
There is a strong correlation between companies that achieved the highest annual average dividend growth rate and those that achieved the highest average share price growth. .......................