Over the last few weeks, we have seen turbulence in investment markets as a result of the Greek impasse, the over-exuberance of the Chinese sharemarket and the fall in the oil price.
This turbulence reinforces the importance of financial planning, having your investments invested in the appropriate risk profile, having them well diversified and having a clear investment and financial planning strategy.
Diversified investments with the appropriate risk profile
The past three to four years have produced great investment returns for a New Zealand based diversified investment portfolio for Moneyworks investment clients and KiwiSaver clients. The key here is 'diversified'. Whether you are a Defensive, Conservative, Balanced, Growth or Aggressive investor, it is important that you don't put all your eggs in one basket.
For our clients who are nearing the time where they are going to live off their investments (retirement), we aim to ensure that they have sufficient funds available in their bank accounts, or short term term deposits for their next two years spending.
In the investment portfolios, we then aim to have a diversified asset allocation, so that there are fixed interest investments, listed property investments, and shares. The amount of property and shares that you have in your portfolio will depend on your risk profile. Your risk profile will reflect your stage of life, and your attitude towards risk and how dependent you are on your investment portfolio to fund your day to day living.
In general, your 'risk profile' will change over time. as you get closer to needing to use your investments to fund your living. This is why it is valuable to have an ongoing relationship with your financial planner, and why it is important that we know what is happening in your world, and what other investments you have in place.
Managing investment uncertainty and turbulence
Even when the overall medium to long term outlook for investments is strong (as we believe it is at present), there is always the possibility of a period of uncertainty and turbulence. As our clients have seen, over time, as long as the fundamentals are good, and the underlying investments are good quality and well diversified, the old adage of 'time in the market and not timing the market' holds true.
The events overseas have had a minimal impact on our clients portfolios, and we don't anticipate that this situation will change. But for more information on the outlook, we have attached two commentaries.
The first is from ANZ Investments, who manage KiwiSaver for a large number of our clients. 15 07 09 Market_Flash_09July2015_ANZInvestments
The second is a commentary from our colleague Janet Natta. We work closely with Janet in our investment committee and in discussing investments, and strategies. She sent this commentary to her clients after the recent Portfolio Construction Summit that we all attended in Auckland. Portfolio Construction then published her comments for all their subscribers. 15 06 Janets Article PortfolioConstruction-Forum_Symposium-2015-my-key-takeouts
If you have any questions about the current environment or would like to have a discussion about your financial planning discussions - please contact us by emailing us here.
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By Carey Church