Investing Failure? Forestlands in the News

When I was young I had issues with credit cards. But I also knew that I should be investing. I was miles away from understanding shares or buying a house but I did stumble across a company offering an investment in pine trees. Forestlands looked like a family run company and you could buy a share in a forest including the land underneath it for $1000. Well I never had $1000. It was not in my capacity at that time to save like that. But Forestlands offered a payment system where you could pay the investment off over 1-2 years. I was instantly sold. Did I do any research into forestry markets? No. Did I read the documentation? Yes but not well. I think I missed a few things. The main thing I missed is that these were B-class shares, meaning no voting rights. That’s never going to be good.

So at the end of March I received a letter informing me that all the Forests have been sold. They couldn’t tell me what my investment was worth and even had a line in the letter advising investors NOT TO CALL and ask because they didn’t know yet. Talk about alarm bells. How can you sell off an asset which has a schedule of investors and their share of the assets and not know how to distribute the funds. Madness.

Forestlands investors left in the dark

So a few investors complained and now the Financial Management Authority is involved and they have got the Serious Fraud Office investigating Forestlands. Apparently there is 18 million in a trust to be distributed to the investors but that doesn’t look like anywhere enough money to even get back what was initially invested. There are rumors that the head of the trust that owns Forestlands actually sold the forests for a lot more and has pocketed almot 19 million dollars in “fees”. We’ll just have to wait and see what the SFO and FMA manage to dig up.

Our Nation Business Review is covering the issue but most articles are behind a paywall so its been hard to keep up with the gossip on the matter but you can see from the pained comments on this article that is affecting quite a few New Zealanders. Forestlands always maintained a folksy family friendly type communications and sent out chocolates with annual updates. It gave them an air of trustworthiness which meant a lot of families felt comfortable buying a few shares for their children as well. Grandparents invested on behalf of granchildren hoping that in the time it took the forest to grow the invest would be worth enough to offset some university fees.

Its hard to keep emotion out of it. My shares in the forest represent about 1% of my total assets. So its a loss I can afford to absorb and move on but you can bet that I feel outraged over the way the Director (Rowan Kearns) has acted.

October Dividends and a Hostile Takeover

So all the dividends have finally reached my bank account and anything not set up for automatic dividend re-investment has been combined with some cash in my brokerage account and invested back into the MDZ index fund.

Single Stocks
Michael Hill $48.06
Meridian energy $149.20
Auckland airport $15.16
PGG Wrightson $56.95
Mercury Energy $88.88
Metlife care $8.15
Abano healthcare $24.27

Index funds (Smartshares)
MDZ $135.15
MZY $29.55
DIV $55.00

Total $665.37 (After tax has been paid!)

I love dividends, I love them soo much. It really feels like the only true passive income, I don’t have to do anything as long as the company does well I do well. Passive income is a magical thing and is an essential part of any financial independence or early retirement plan. I finally have money that is making me more money. You can read about how to buy shares and get started investing in the New Zealand share market in my previous post “So you want to buy some shares……”

Total Dividends for 2016 $1037.17

I’m pretty pleased with the dividends this year and its after tax too! Making a grand for doing nothing is a sweet deal. It doesn’t even seem real. It certainly makes up for the mild melancholy that takes over when the market is going into bear mode. I’ve stopped checking my portfolio on my breaks at work, I was obsessing and its better that I just chill and keep to the plan. $500 a month, every month invested into index funds. I’m keeping it simple from now on, no more single stock purchases!

The New Zealand Share market has been on a downward trend for the last few months, but I had one little bright spark. Abano healthcare become the subject of a hostile takeover on Friday afternoon and the share price jumped from $7.60 to $9.00 in less than an hour. It was pretty exciting to watch and word is they are paying $10 a share to try acquire 50.1% of the company. I’m not really sure what that means for a little minor shareholder like me, lets just say no one’s calling me on the phone to try buy my shares just yet, but it was quite a fun afternoon for an amateur investor.

 

OMG the Sky is Falling – Useless Media Panic

Our national newspaper is kinda sucky. Since the digital age they are all about click-baity headlines and celebrity gossip with a few bastions of journalistic integrety trying their hardest to break through garbage. It seems like most editors have been fired and fact checking is now a relic lost to the golden era of newspapers.

This recent dip in the market was covered by the business sections with new articles during the day, oh crap sky is falling, oh wait don’t worry we’re bouncing back, NO ACTUALLY PANIC because this afternoon investors sold everything!

Sharemarkets! everybody Panic screenshot-2016-09-13-21-46-24

“Fear returns” and “relief rally” are highly emotive and even in someone like me, who has been investing in shares since before the GFC, it still elicits a stirring in the gut.

My strategy is to just keep on keeping on. I’m investing in the sharemarket for the long term i.e more than ten years. I mostly hold index stocks and the companies I have bought individual stocks of seem solid enough (well nothings set in stone I guess) and I’m not worried about any of them going bankrupt overnight because of jittery markets. I still make my monthly contributions and if its gets too depressing looking at the share prices, I just stop looking so often.

Being well diversified keeps the panic at bay and helps me sleep at night. My investments are in multiple type of index funds and in multiple countries. I also have other types of assets like property, P2P loans and forestry.




It helps to be mentally prepared for dips in the market, imagine your net worth falling, imagine losing 10%, 15% 30% 50% of your net worth! And then think about what you would do in those scenarios. By thinking through worst case scenarios you’ll be emotionally prepared when they happen and less likely to make a gut reaction. You’re more likely to behave logically because you’ve “practised” how to react.

Another way to protect yourself from these sky is falling articles is to gain some insight into the way these sites work, they want clicks so the headlines are deliberately shocking. Brent Sheather wrote an insightful piece on the half truths and outright lies that appear in media finance commentary and that might help immunise yourself against being swayed by “expert opinions” in news media.

Of course maybe the best solution is just to just stop reading the business section?

 

 

 

How to be an Effective Saver

We all want to be super savers, but how do you get “good” at saving? Practise is a big part of it, you can’t help but get better at what you do often. Until the savings habit becomes a deep ingrained part of your psyche I thought I’d help you out by sharing some of the strategies I’ve used over the years to help me be a better saver. They’ve worked well for me but everyone has a different savings mojo.

Computers are our friends, let them do the work for you.

Automate – We already have so much to think about so make life easier on yourself and automate your savings. Have a portion of your paycheque go straight into your savings account. There’s no chance that you’ll forget some weeks and it won’t become a chore you have to remember to do every time you get paid.

Why are you even saving?

Save with purpose – Set savings goals, you might need an emergency fund, long term savings for retirement an short term savings for big ticket items, house deposit or a holiday. Keep emergency funds and long term savings separate. Savings for retirement need to grow so never dip into that stash of money. And how about taking it a level deeper, yes retiring early and establishing an emergency fund are excellent reasons for saving. But why do you really want an emergency fund? Why do you want to retire early. Take some time to think over the kind of financial situation you want for yourself and why.

You are your own worst enemy

Keep those dollars at arms length – If a nice fat bank balance is too tempting for you then open a savings account that is a bit trickier to access. Try another bank or an online only account. You don’t want to be able to flick money over to spend instantly when you are faced with temptation. If it takes a day to transfer over hopefully that will dissuade you from some impulse purchases! Don’t link the account to any cards.

 Bank your windfalls

Add pay rises to your automated savings – you won’t miss what you’ve never had. So don’t let pay increases lead to lifestyle inflation. Instead up the automated savings amount to match the pay increase.

Money

Grow cash GROW!

Money’s got to have a job, no lazy money! – Once you’ve built up some savings put those dollars to work. Don’t leave tempting piles of cash around as you might start to feel those dollar burning a hole in your pocket. A huge balance might make you feel wealthier but you can’t spend those dollars just yet, you need to grow them even more! Invest the cash into income producing assets, shares, index funds, property, bonds etc.

Squeeze out a few more dollars, you can do it!

Save everyday – Did you skip buying your lunch, did you negotiate a discount on a regular bill? Transfer those day to day savings out of your transaction account and into your savings as you go. Not only do you get the great feeling of scoring a deal your savings balance goes up as well. Twice the rewards!

Saving gets easier the more you practise, but one final thought. Saving can also become exhausting. A little mad money for guilt free splurges will help keep you sane and keep your savings on track. Good luck!

 

Small Time Dividends – Don’t let them Escape!

Today I got my Abano Healthcare dividend. It was approximately $29 or enough to buy a 6 pack of craft beer and 500ml bottle of something special on the side. Yum! But drinking my profits was never the plan (well one day maybe).

Abano Health share price graph
Its been a fun 6 months or so, I bought in around $6.70, thanks Abano

So no beer for me because I have the dividend re-investment plan activated. My money has automagically turned into 3 more shares. Every 6 months the dividends are used to purchase more shares on my behalf and any remaining money is rolled over till the next 6 months.

Dividend re-investment plans work really well in New Zealand for a couple of reasons.

  1. We currently  have no capital gains tax. This means that these small amounts of money aren’t going to become a pain in your ass years down the track when you need to calculate your capital gains on all the small share buys.
  2. Brokerage fees here are really HIGH! It costs a lot to make a trade so anytime you can buy shares for free is a win in my book.

So if you’ve been wondering what to do with all your little dividends get online and check if the company has a DRP or Dividend re-investment program. Its way better than receiving a cheque (argh so inconvenient!) or having the measly $29 sit in your account doing nothing and not earning its keep. Dividend re-investment is already happening for most of you in your kiwisaver accounts and probably in your index funds as well (unless you checked the dividend pay out box!).

Out of sight out of mind, it happens with out any extra input and that tiny dividend is no longer tempting you to buy some craft beer that your waistline doesn’t need! Make sure your money makes you more money by keeping it invested. It’s the aim of the FIRE game and it will get you the the finish line faster.