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“Never Spend all that you earn.
Always borrow less than you can afford.”
~ Peter Thornhill

The above advice has never been more relevant in the current climate of the rising costs of living and interest rates. However, it doesn’t really matter what the current financial parameters, if you keep spending more than you earn, borrow to the brink of what you can afford and don’t invest wisely and with expertise to help your money grow, most likely you will eventually run out of it!

This is not only great financial advice for people on low or restricted incomes, but people on higher incomes can also often be tempted to spend more than they earn and think it will not catch up with them, however the law of mathematics ensures that it usually does! This same mistaken confidence can also propel people into borrowing to the very limit of what they can afford rather than borrowing enough for what they need, forgetting that interest rates over the long term will not remain static but will steadily be adjusted both up and down over the long-term.

By adhering to the above simple two financial principals, you may be able to develop plans to invest in both yourself and to begin establishing investment plans and goals. Secondly, by borrowing less that you can afford you further free up income that would be going towards interest payments and have the peace of mind of not being under financial stress each time interest rates might rise even .05%.

At Income Solutions it is often stated that an investment in yourself is the best investment you will ever make https://www.incomesolutions.com.au/the-best-investment-you-will-ever-make/
Mindfully using some of your savings to invest in your career, education or general wellbeing will improve your focus and give you the tools to work towards your long-term goals. Working in partnership with our clients we have never come across anyone who has told us they regret studying or training to improve and update their qualifications or skills.

Also, consider making your money work as hard as you, history and figures show an investment in a balanced share portfolio (SP500*) over the last 20 years will provide larger returns than simply parking your money in a savings account or term deposit:

– $10,000 invested over 20 years in shares (*SP500) = $50,913.05 ~ a return of 8.06%
– $10,000 invested over 20 years in term Deposit = $18,208.00 ~ assuming a 3% return
(3% is generous considering the current Term Deposit rate is approx. 1% and less for funds over $250,000)

And while past performance may not be a predictor of future performance, history can provide us with a guide to make informed decisions and choices. For further information refer https://www.incomesolutions.com.au/wp-content/uploads/2021/05/e-book-Investing-a-little-a-lot.pdf

As a client of Income Solutions you will be provided with a proven and successful investment framework that has been developed over 30 years together with qualified and experienced expertise from financial planners and advisors who are licensed and compliant to the highest industry standards.

Referenced for this article:

https://www.officialdata.org/us/stocks/s-p-500/2001?amount=10000&endYear=2021

https://moneysmart.gov.au/saving/compound-interest

“Receiving advice from a qualified professional is almost always going to be a better option than trusting an amateur dishing our stock tips in a video synched to the latest rap tune”
Aleks Vickovich, Wealth Editor ~ Australian Financial Review March 22,2022

ASIC (The Australian Securities and Investment Commission) is concerned about the unlicensed financial advice that is being posted by ‘Finfluencers’. Most influencer’s post information and advice about money and investing on a variety of social media platforms, however they usually do not have a financial services license.

It is not only ASIC who is speaking out about the dangers of unlicensed financial advice and social media content, Judith Fox, CEO of Stockbrokers and Investment Advisers Association has also welcomed more stringent compliance regulations for ‘Finfluencers’, pointing out that investors have absolutely no recourse if they are burned by the advice given.

A worrying trend has developed where some ‘influencers’ will talk about stocks that they themselves own, their followers will then buy the stock themselves at a higher price, and then the ‘influencer’ will sell their stock at the higher price, leaving others with worthless stock! This practice is now known as ‘pumping and dumping’. Further, many are paid by financial services organisations to promote their products and services and they are under no obligation to disclose conflicts of interest or the fact they are getting paid to promote or advertise products.

When comparing unlicensed and licensed financial advice it should be noted that all licensed advice is given by individuals who have a relevant bachelor’s degree, and often further specialist training, subscribing to arduous licensee training, compliance, insurance and dispute resolution requirements.

It is the Law that financial advice is only given by a licensed financial adviser whose clients have access to the Australian Financial Complaints Authority and ASIC, who will ensure compliance and auditing obligations are meet. Accountability for stock and investment advice can be enforced when dealing with a licensed financial adviser.

On the other side of the equation, those giving financial advice on social media platforms who are not licensed are breaking the Law but it is often difficult for ASIC to hold them accountable for the financial advice they are giving, which allows for very little readdress for those investing their money based on this online advice.

At Income Solutions, we believe that obtaining compliant and specialist expertise to create wealth is key to ensuring the money you invest is appropriate to your individual circumstances and goals, is secure and invested for maximum returns within the principals of best practice.

Referenced for this article:

https://www.abc.net.au/news/2022-04-06/brt-finfluencer-crackdown/100965298

https://asic.gov.au/about-asic/news-centre/articles/regulatory-risk-and-finfluencer-engagement-for-company-directors/

https://www.smh.com.au/business/banking-and-finance/asic-finfluencer-crackdown-curbs-social-media-finance-posts-20220408-p5ac2n.html

https://www.afr.com/companies/financial-services/finfluencer-crackdown-highlights-ludicrous-advice-laws-20220322-p5a6t1

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“Everyone is entitled to take risks. However, we advise first-time investors to focus on long-term goals and not make rash decisions based on a fear of missing out on market falls or gains. We also recommend learning about trading before you start or getting advice from someone you trust.”
Quote: Greg Yanco, Executive Director, Markets at ASIC

The Australian Securities and Investment Commission is concerned about the number of investors using online trader platforms who are unaware of their risk exposure. While it can be seen as a positive development that more people are taking an interest in the markets, it is important the inherent volatility and complexities of the market are fully understood before handing over money to trading platforms, especially first-time investors.

At Income Solutions, we believe that the recommendation made by ASIC Executive Director Greg Yanco, that people learn and educate themselves in understanding the share market, together with getting financial information from a trusted advisor has the potential to not only save you money but increase your investment portfolio into the future. To demonstrate this point, at Income Solutions when working in partnership with our clients to develop a financial plan, one of the important financial strategies that we ensure they understand is the difference between Speculation and Investing https://www.incomesolutions.com.au/the-difference-between-investment-and-speculation/ as research shows that applying this financial strategy potentially increases long term financial outcomes.

There is currently a lot of misinformation around trading strategies online that are the result of online scams and unlicensed advice, or the product of social media campaigns where trading companies are sometimes paying for favorable comments on forums such as Reddit or Facebook. For these reasons financial advice and education needs to be supplied by licensed and credentialed financial advisors who are regulated through ASIC and meet stringent compliance obligations and requirements.
While online trading may be a relatively new financial option, the Aesop’s fable written in the mid-6th century comes to mind of the ‘The Ant and the Grasshopper’ https://www.youtube.com/watch?v=_svBrlehmMo
The ants demonstrating that a consistent and considered approach to planning for winter (or your financial future) brings about the best results rather than the ad hoc approach of the grasshopper who wanted quick outcomes without a lot of planning or effort.

While an online trading platform may be a convenient and quick vehicle for people to ‘have a crack’ at owning shares, it is worth considering whether this approach is what is needed when planning and investing in your financial future. While it may take a little longer developing a financial strategy and plan and stopping to seek compliant and trusted financial advice the outcomes in the long term may well prove to be worth it.

Referenced for this article:

https://asic.gov.au/about-asic/news-centre/news-items/first-time-trader-be-aware-of-the-risks/