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Investment Portfolio Management for individuals, couples,
companies, trusts and charitable trusts

Content image

Investment Portfolio Management for individuals, couples,
companies, trusts and charitable trusts

Investing in shares is too hard and too risky…isn’t it?

Yes, a scary subject for many – shares and sharemarkets.  Unfortunately, images that often come to mind for many include slick-talking, pointy toed Wall Street Traders, silver screen glorified ‘Boiler Rooms’, scammers who prey on the misinformed, red-faced, bellowing 80’s-esque trading floor brokers etc. Sadly, this Hollywood misconception, along with media misrepresentation, can turn many ‘would be’ investors away from this highly important and sensible asset class. Here are a few key things to think about with regards to sharemarket investing, which may encourage you to explore it some more when considering your overall financial plan going forward: Investing in shares over the long term has proved to be one of the most lucrative ways to invest when compared with other asset classes. For example, somebody who took an overall position in the US Market in 1970 and just left it there until 2016 would have realised a gross return of 9263%!** (or turned $100 into $9,363)**. That’s an investment return that is pretty hard to ignore! Investing in sharemakets enable economies to grow and flourish, as companies have access to capital which induces further investments and growth Investing in shares helps an investor diversify away some of their risk by holdings assets in different industries, geographical regions and currencies. Investing in shares is a highly liquid way of holding your capital – in other words, if you need your capital back quickly for a bathroom renovation or overseas holiday, it can be as easy as selling your shares on an exchange which, in most cases these days, takes around 4-5 working days to convert to cash Investing in shares doesn’t have to be risky IF you are well diversified with your share exposure. Holding a handful of speculative mining or bio tech stocks is NOT diversification. Yet sadly, many ‘get rich quick scheme’ chasers want the big bucks quick. Investing in shares is best done with a longer term horizon (see point 1 above..) One of the main reasons why people lose money in the share markets is by simply following the crowd. They ‘buy high’ when everyone is doing it and ‘sell low’ when everyone is getting out…by simply ‘staying in’ through the ups and downs, you can avoid a lot of the pain and do better than most, provided you are DIVERSIFIED! As you can appreciate, shares are a pretty convincing way of investing, provided you do it right. The important thing to do when considering sharemarkets as part of your investment strategy is to talk a professional who understands the pitfalls along with the positives and can give you impartial, practical financial advice. DISCLAIMER: The...

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Is it really that important to start saving early? Honestly – how much difference does it actually make…?

You’re sick of it, I know. Everywhere you turn, someone is hawking savings advice. ‘Get into Kiwisaver’, ‘Don’t spend more than you earn’, ‘Start saving early in your life’ blah blah blah… In this blog, we are going to perform a bit of a ‘Mythbusters’ session and see what all the fuss is about regarding saving early. This exercise involves using financial calculations and you are welcome to check them for yourself on any online financial calculator (just google ‘financial calculator future values’ and have a go yourself). OK, let’s get started – I will give 3 simple examples and show you the wonderful and wealth enhancing effect of compound interest – the compounding effect on money (or on any form of matter for that fact) where money’s own earnings growth subsequently continues to grow upon itself, causing an exponential growth effect over time. The most valuable component of the compound effect that gives this exponential effect its awesome power is exactly that; time (as you will soon see). Our first example is Chase – a keen 18 year old who has just left school and has started a plumbing apprenticeship. For simplicity, he earns $630 gross a week ($15.75/hour – current minimum wage) He will therefore receive $510.94 in the hand (presuming he is enrolled in Kiwisaver with initial balance of $0) If he only ever earns this much for the rest of his life and decides to save $100 per week until he is 65, he might expect to retire with…$1.2 Million! If he lives til 95, that may give him $64,000 after tax to live off per year   Our second example takes a young(ish) lady, Rockee, who is now 40 and earns $25 an hour as a PA for an insurance adviser ($1000 a week) Net income is $790.34 in the hand (presuming she is enrolled in Kiwisaver with current balance of $15,000) Assuming she saves $150 a week til 65, she might expect a balance of around $570,000 That may only provide her with $28,000 to live off per year In contrast to Chase, she earns significantly more, is saving more, has a bigger Kiwisaver balance at the start BUT because she started just 12 years later, ends up with half as much… So maybe it might be wise to start saving earlier rather than later…if an apprentice could end up a millionaire doing nothing out of the ordinary…well maybe you could too! DISCLAIMER: The above example are based on EXPECTED RETURNS. Returns are never guaranteed and past performance does not guarantee future performance. Expected returns in the examples above assume 5% p.a achieved...

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Building wealth for retirement (or a Ferrari…)

How exactly do you get wealthy? How do you prepare a solid nest egg for retirement so you can live out the retirement you long for rather than having to settle for? How does one acquire a luxury Italian sports car. Familiar questions? The answer can often appear elusive, unattainable or complex but really it can be quite straight forward… Wealth, from a financial sense, is generally achieved one of three ways: By starting a business/company/property venture etc, committing a large majority of resources to the venture and ultimately selling part/all of your assets/shareholding for a large capital gain. Many wealthy people build their fortunes this way. There is nothing wrong with this but it all comes down to risk and return. These people often risk it all, reinvesting profits to further build the business/buy more property, using leverage (borrowing money) to exponentially increase their return on investment. This method has created billionaires and bankrupt just as many. It involves the greatest risk but ultimately holds the largest potential return. By putting together a regular savings plan, utilising the potential of your human capital (your ability to work/upskill etc) and investing surplus income over the long term, taking advantage of compounding interest. This generally involves far less risk but can take longer and to be done effectively, usually requires some careful planning. By relying on the right six balls rolling down the chute this Saturday night. By far the quickest, painless (and most unlikely) way to achieve wealth…so long as others don’t share your luck that same night… Which one is right for you? Well putting no. 3 aside (if this IS your retirement plan, then we need to talk…), then that is a discussion you would do well to have with a range of different advisers: Starting a business/company/property venture: you would do well to seek advice (at a minimum) from an accountant, a solicitor and a business mentor Regular savings plan:  would best be achieved by visiting a good financial planner who can work with you to put a comprehensive long term plan into place. DISCLAIMER: The above comments are general in nature and DO NOT constitute financial advice. Before making any decision, we recommend you consult a financial planner or investment adviser to take into account your particular investment objectives, financial situation and individual needs. A full disclosure statement is available on request and free of...

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What type of asset will give me the best returns?
May11

What type of asset will give me the best returns?

9/5/16 What type of asset will give me the best returns? Yes, it’s an age old debate isn’t it? “Property is better than shares”, “Shares do better than property over the long term”, “My house doubled in value over the last 10 years! How can you beat that?”. “Cash is King! Why risk it?”  And so it goes on… Let us pause for a second and have an objective look over the last 14 or so years to take a look at which asset class had the best result for any particular year: (image courtesy of Morningstar) The columns in the chart above show best (top row) to worst (bottom row) returns for any particular year for each asset class (coloured coded) There are some interesting points to consider from the statistics above: It is very difficult to try and determine which is to be the next best performing asset class There are some themes over the last 20 years – notably that Small Caps & Listed Property tend to top the list more often than other asset classes At some point over the last 20 years, just about every asset class has had the honour (?) of being the worst performer So really, it’s not so much about, “what should I be in now?” but more about, “…should I be in now?”. The answer, of course, depends on your personal situation so please seek financial advice before doing so. But to be in a range of asset classes or not…well that is the better question rather than what and when.   DISCLAIMER: The above comments are general in nature and DO NOT constitute financial advice. Before making any decision, we recommend you consult a financial planner or investment adviser to take into account your particular investment objectives, financial situation and individual needs. A full disclosure statement is available on request and free of...

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Where on earth should I invest these days?
Apr01

Where on earth should I invest these days?

“Gee oil is cheap at the moment. Might invest in an oil company. Oh wait, no its not, oh hang on, yes it is again…too hard. Better invest in gold cos that’s always going to go up and will at least keep up with inflation, oh hang on a minute, what’s happened to gold over the last 1-2 years. How could it fall in price? I thought everybody loved gold! I’ll give share trading a crack then …oh no sharemarkets have fallen too this year. Hang on they are lifting again. Might be time to get in now…flag it I’ll just buy a rental property. At least they give good tax free, capital gains (if I ignore the 90’s and global financial crisis). Oh wait, the Government is changing the property tax rules. Oh well I can still collect rents…hang on, what do you mean I might get a negative yield on my property!? Property always goes up right?  Ahhh this is all too hard. I’ll just keep my money in the bank. Excuse me – what was that you said? I’ll only get paid $3,500 over the next year BEFORE tax for putting my $100K in a term deposit? What sort of offer is THAT?! And I heard the other day that might be a good deal in months to come. Hey well at least I won’t get a negative interest rate in the bank like some countries…will I? Gee maybe the mattress and a good home security system is my best investment option!” Any of this sound familiar? Everyday seems to present a new story as to either why the sky is falling or conversely the next opportunity for getting rich because this time it really IS different… No matter which way you might go, there are a few important things to remember when considering how to grow long term wealth and it doesn’t matter what you invest in or when or how: There is always risk in any type of investment. The key to successful investing is how you manage that risk Everything goes up and down in value so it is very important to control your short term emotions through short term volatility in a game that benefits those who maintain a longer term vision Easter is the one forgivable situation when it’s ok to put all your eggs in one basket. Investing is NOT. Diversification is the key to mitigating a good chunk of investment risk If it sounds too good to be true, it generally is. Whilst the biggest risks can sometimes return the biggest gains, be sure to get good, competent professional...

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Time to sell or time to buy???
Feb12

Time to sell or time to buy???

OK lets be frank (my name is Patrick but today I can be frank)…2016 has not started too well for sharemarkets around the globe (save the New Zealand sharemarket which has been rather resilient thru the turmoil in spite of falling dairy prices – ok that’s a discussion for another time…). Many investors have chewed their nails down to the cuticles as they watch the value of their holdings drop daily over the past few weeks. It’s even harder for Kiwisaver members who have had a pretty good run if they started back in 2008 and avoided the GFC fall out (most would have). This is the first significant market correction we have had in a number of years which could see such investors receive their first six monthly negative return! Doom and gloom is everywhere. The sky is falling, chicken little… Now let me ask you this question. If there is a sale at The Warehouse or Bunnings or New World, do you avoid it because you think the products are inferior? Or that nobody wants those sale items so they can’t be worth buying? Of course not. You go in there and buy up because those items are cheap and you can buy them for less than what you could yesterday or last week. You value them same so in essence, you got a bargain, or paid less than what you otherwise were prepared to pay. The same can be said about the recent sharemarket ‘crash’ or ‘correction’ or whatever other term the columnists may refer to it in their daily bulletins. Getting the right advice is essential, of course but right now could spell opportunity for many who could essentially buy worthwhile, good investments for a bargain at what they otherwise would have paid. While nothing is ever guaranteed in the (not so) scary world of investing, broad markets and asset classes will always inevitably go up in value over the longer term, with short term set-backs in prices often presenting a great opportunity to buy. So while everybody is talking about the next GFC/Tech/Bond market crash and nervous investors are calling their brokers to SELL SELL SELL, it might be time for the intelligent, longer term investors to talk to a good, reputable financial adviser about where opportunity lies to BUY, BUY BUY! DISCLAIMER: The above comments are general in nature and DO NOT constitute financial advice. Before making any decision, we recommend you consult a financial planner or investment adviser to take into account your particular investment objectives, financial situation and individual needs. A full disclosure statement is available on request and free of...

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