SEPTEMBER 8, 2019
make a change!
This may seem like stating the obvious, but how many times a week do you find yourself saying, “I keep meaning to get round to that”.
I used to have a problem with saying, we should get together. I changed my language and now I say, I am free at these times, do any of them suit you? Action doesn’t happen if we don’t actually take action.
Investing is one of those things that I regularly hear people say, especially about Kiwisaver, “I keep meaning to get onto that”. Whether it is starting it for the kids or changing out of a default scheme, the lack of action has a specific cost involved.
The specific cost of not taking care of getting out of a default Kiwisaver Fund can mean thousands by retirement in lost earnings, depending of course on how old you are when you start. This can mean no holidays in retirement, scrimping instead of living etc.
Our actions have consequences, and if they are long term we tend to put them off until we can’t, don’t let your retirement savings suffer because you didn’t take action.
Markets move in cycles and while there are increasing discussions around when the next market crash will occur, there is no need to panic; a correction is a normal and expected part of investing. Measures we take to manage the impact to your portfolio are already on our radar.
While I hesitate to use the word ‘crash’, it is the term used by most (overused by the media) to describe a ‘drop’ in share market values. It is part of a normal market cycle that has repeated for decades. As companies grow their earnings, their value increases; the Rally. The market factors in ‘expected’ future earnings and depending on its level of optimism, the market price overshoots fair value. If, or when, earnings disappoint relative to expectations, or an event or new information triggers a lower assessment of value, prices go down; the Crash. The drop is generally an overreaction and in due course prices return to their previous levels; the Recovery.
What is different this time is the length of the current rally. Historically market cycles have generally ranged from 4 to 7 years between peaks. It has now been 10 years since the last meaningful drop in market prices. So, does this mean a correction is imminent? In a word – no. There is certainly an increased risk of a correction as time passes, but it doesn’t mean it will be next week, next quarter or even next year. The doomsayers have been warning of a crash for years. This headline from the NZ Herald warning of a crash was from October 2016; almost 2 years ago. Since then the Dow Jones Industrial Average Index has gone from 16,000 to 28,000, this is a 75% gain over two years.
What will we do when markets ‘crash’? We will not pre-empt the drop and sell out of shares before they drop (research shows that attempting to time the market is futile), and we will certainly not recommend selling after the drop. That is not to say we are not prepared for a drop. In fact, we have been preparing for the next drop since the last one. We manage your portfolio knowing that the rally-crash-recovery cycle will always repeat.
These are four of the steps we have already taken to ensure your portfolio is well positioned to survive the next correction, whenever it may be, and benefit from the subsequent recovery and rally.
We limit exposure to riskier, share market investments to appropriate levels:
We periodically measure your risk profile, including your risk tolerance and risk capacity. This is often done using a formal tool such as the FinaMetrica or Morningstar test, or a conversation during initial or annual meetings. By setting a benchmark asset allocation, and during a bull market periodically rebalancing the portfolio back to those weightings, we are in effect selling high and buying low all the time. We are reducing the exposure to assets that have increased the most, and buying more of the safer, less exciting assets. Conversely, when shares go down, we will take advantage of lower prices and increase holding in those cheaper assets.
Diversification across and within sectors:
We spread portfolios across shares (equities), infrastructure, property, fixed interest and cash. Even within sectors, such as shares, we invest in different geographical areas, business sectors and company styles. Fund managers may hold 50 to 100 stocks within their fund, and we may hold 3 to 5 funds in a sector (or more). We tend to limit the exposure to any one fund to around 5% or 10% of a total portfolio. (You can see the exposure to each asset, and asset class, in the far-right column of a valuation report.)
Active funds management:
We outsource the day to day analysis, buys and sells of individual stocks to fund managers with a depth of resources to be able to do this far more efficiently than we could. We use a range of managers with different styles to actively buy and sell assets at their discretion. We regularly meet with them and buy research on all NZ and Australian based managers. If a manager feels that the markets are overly expensive, they may choose to take an active position away from the market – i.e. holding more cash and less shares.
Maintaining sufficient cash and short-term fixed interest to rebalance and fund withdrawals:
For clients that take regular, or even ad-hoc withdrawals, we try to maintain several months’ worth of expected drawings on call, and enough funds in short term fixed interest to cover several years of withdrawals. This way the access to cash is not impacted by share market movements, and we are able to buy more shares when they have ‘crashed’ to lower values.
If you are concerned about the next stage in the market cycle, or would like to discuss your portfolio, please call. We are only a phone call away.
So, you are not into model aeroplanes or bowling, nor do you find the idea of playing golf five days a week appealing, what now?
I think that when you decide it is time to give up paid work, it can be difficult to transition if you don’t have a clear idea about what it is you want to do next.
Retirement is a relatively new phenomenon, and it is not the end of your meaningful life, if you don’t want it to be.
Retirement means different things to different people, but the general idea is that our most valuable commodity, time, is now more your own to enjoy. This can be a very special time of being in a position to give of yourself in a way that you haven’t been able to before, it is a time to pass on wisdom and show those millennials a thing or two about being grateful for all they have.
Retirement can be the busiest time of your life. First and foremost, grandparent duties, if there are none of your own, then find kids who need a grandparent. There are lots of kids who have parents who are worn out, strung out and need some encouraging and need to know they are not on their own. Visit your neighbours, take baking, offer to babysit, whatever it is, connect with others in a meaningful way.
Find what makes you tick, are you a people person, do you enjoy serving others, fixing stuff, building things? What is it that you see as a worthwhile way to spend your time?
Your days will be more relaxed, you can choose to hide away or contribute to society in another way. Time is a valuable commodity and now you have some, use it wisely. Don’t they say that you get wiser as you get older?
Whatever your passion, whatever your gifts and talents, you are a valuable member of society. We look forward to seeing your golden years as your best yet.
If you are worried about money, if you will have enough in retirement, don’t hesitate to ask for help, that is what we are here for.
April 2017 Funds Update
While financial markets have been watching political developments overseas with interest, it is just over 140 days to our own election on Saturday 23rd September. There is a high degree of uncertainty with the NZ election with political polls indicating that if an election were held today the result would be too close to call. NZ has been fortunate to have had stable governments over the last 17 years under the leadership of Helen Clark and John Key.
However, that could all change this year and any coalition is highly likely to need to rely upon the support of either NZ First or the Greens to get the numbers. Neither Bill English nor Andrew Little have won an election before. So what should Bill English do if he wants to keep his job? We thought it would be interesting to get the debate going on what policies we would like to see implemented. Here’s a quick summary of some of our ideas:
– Infrastructure. Interest rates are still close to historic lows and the world is awash with capital looking for long term infrastructure projects. NZ has a significant infrastructure deficit … Read More
Phil is an avid traveller and enjoys exploring different places and learning about different cultures. Phil has travelled extensively through Europe, the US, parts of Asia including Japan and China, Israel and India. Most recently he spent time on the ‘Big Island’ of Hawaii, exploring volcanic activity in a Robinson helicopter with no doors on, heading to the summit of Mauna Kea, swimming with dolphins and snorkelling at Kealakekua Bay plus driving a giant American SUV down the notorious Waipio Valley road. He was too busy gripping the steering wheel to video it but this kind person on youtube did it for him
Phil’s love of travel also offers plenty of opportunity to partake in another of his passions. food! As a bit of a gourmet, Phil thoroughly enjoys cooking and trying new flavours. Fresh, self-caught seafood would be high on Phil’s list, though he has also perfected the art of the home-made pizza, and is also partial to fine wine and trying out some of the great boutique beers that New Zealand has to offer.
Whilst now back in Tauranga where he grew up, Phil spent the past five and a half years living in Cooks Beach on the Coromandel, where his favourite way to start the day was getting up well before the sun and heading out into Mercury Bay on his kayak for a touch of fishing. Phil was also a valued member of the volunteer Cooks Beach Fire Brigade for over five years.
In the past Phil has completed multiple endurance events including marathons, half-marathons and the Motatapu Ultra Run from Wanaka to Arrowtown. Recently Phil has also taken up a keen interest in cycling, and has already twice cycled the Otago Rail Trail and late last year completed the 300km ‘Alps to Ocean’ cycle from Mt Cook to Oamaru, and has plans to tick off more of New Zealand’s cycle trails over the coming years.
Now back in Tauranga and living close to the water and his Mother, Phil is back into his kayak-fishing and surfing, and can regularly be seen running up the Mount. Despite his active lifestyle, Phil always prioritises his clients and their needs and is happy to offer his advice.
Tanya first came to financial planning over 13 years ago. She started out her working life at the IHC, then a retirement village while training to be
a social worker and eventually getting a job that involved ensuring college age children had the best possible opportunity to stay at school. It was
the first “wrap-around” service locally, making sure that all the agencies who needed to be involved with a family were.
After this Tanya worked at Fulton Hogan improving her administration skills, photography skills and “stop/go” skills, it was lots of fun but didn’t really fulfil her passion to help people. It was also here that she started her Bachelor of Business Studies (Finance), which then took a diversion into the Graduate Diploma in Business Studies (Personal Financial Planning).
After being introduced to a local financial adviser (while working for an accountant), she got her first taste of what it was like to help people with their money, and she loved it. The other benefit to giving financial advice was looking forwards not backwards!
Due to wanting to be part of a larger group she began looking for a group of like-minded advisers to join. After having met with a couple of the financial advisers from Decision Makers while at her other business Tanya was eagar to join the bigger group, as she could see that there would be big benefits to her and her clients alike. Soon after her move to Decision Makers she received her designation as a Certified Financial Planner CFPCM, which is an international recognition of excellence.
One of the main benefits of joining a larger group was to have advisers with different strengths that complement each other. As part of the Decision Makers family she is involved in the running of the website and social media. If you have any ideas for what she could write about please let her know, it doesn’t need to be about investments. Also if you have family members or friends who ask you money questions you don’t know the answer too, she is happy to help.
Tanya is currently the committee chair for the local branch of Motor Neurone Disease Association New Zealand. This is a role that has been borne out of too much contact with the disease, starting in the 1980s with her Nana and then her friend and her family (it is only familial in 5-10% of cases) and her husband’s friend. There is currently no one cause and no cure. If you would like to know more, please check their website (it is called Lou Gehrig’s disease or ALS in the USA). www.mnda.org.nz
Tanya is mother of three, a teenager, a tweenaged and a 7-year-old, a wife, and has a hazard in the office by the name of Milo (a very loveable chocolate lab who enjoys sleeping on the floor, blocking her chair so she can’t leave without her!).
We are delighted to share some good news with you; this week Harbour Asset Management was named Morningstar New Zealand Fund Manager of the Year 2017. They are proud to have been named Fund Manager of the Year for the second year in a row.
“Harbour is one of the best stewards of New Zealand investors’ money. The shop applies a detailed, well-thought-out investment process to all its funds, has an open and transparent approach, and has consistently delivered market-leading longer-term returns.” – Morningstar
Harbour says that their fundamental goal is to be most trusted by our clients, and being named as a leading steward of investors’ capital by Morningstar helps to validate this.
We want to thank every one of our clients and supporters for putting their trust in Harbour, and we look forward to many more years of continued success and growth
Decisions we make today, impact our tomorrow.
There is ALWAYS risk when investing (including term deposits), it is a matter of finding out what the risks are, and deciding if that level of risk is acceptable to you.
Knowing our risk-tolerance profile with regards our finances is very different to risk taking elsewhere. I know for myself I am perfectly happy to jump out of a plane to go tandem skydiving, but I am also personally a more conservative investor when compared to the masses.
- Do I know what investment risk is?
- Do I understand the level of risk I am taking currently?
- Am I better helping others take risk rather than taking it myself?
If you want to find out your financial/money RISK TOLERANCE you can find out here.
YES THE TEST IS FREE and with NO OBLIGATION
Finding out your risk tolerance will help you to know how to invest for your character, not your emotions on a given day. The test is pyschometric, meaning that it tests your traits (permanent) versus your disposition (emotions on the day). This is very important.
On the other hand the risk-tolerance is very different to your risk CAPACITY. Sometimes the most aggressive investors have the least capacity to invest due to their willingness to take a risk, but this is not always the case as sometimes the risk paid off.
The first step to investing is to SAVE. If you are not saving, why not? If you currently save nothing, have you ever tried setting up a bank account and having an automatic payment going in to it for $5 per week? This experiment I know will have you saving more, as you see your success it will spur you on to save more. In these days of internet banking it is easy to set up a new bank account and start saving.
Don’t put-off today those things that can change your tomorrow for the better.
DecisionMakers is proud to announce that we have a new adviser joining our team, Phil Armstrong.
Phil is an experienced Authorised Financial Adviser (AFA) specialising in investment portfolio management. Phil has been in the industry since before the Global Financial Crisis and has successfully guided clients through these volatile times. As an independent Financial Adviser Phil provides unbiased advice, prioritising his clients’ interests and needs. Prior to forming DecisionMakers (Western Bay) Limited, Phil worked both locally and internationally with Fonterra, Diversified Investment Strategies Limited and Fisher Funds. Phil has a real passion for providing expert financial advice and investment results for his clients.
Phil is available to see clients throughout the Western Bay and beyond.