Spread Your Investment Risk (Diversification)

4. Spread your investment risk (or diversification)

Or – don’t put all your eggs in one basket.

To get your money working for you, you need to have different investments, asset types and different investment providers. Your KiwiSaver fund will be diversified in the ways that we have outlined below. (unless you are in a particular asset class like International Equities).

Three main asset classes: (link to more information on each of these)

  •          Fixed Interest/Cash
  •          Equities
  •          Property

Each of these asset classes will perform differently in different markets, so it is important to have an exposure to each type.  How much of each one you will have in your investment strategy will depend on your risk profile.

‘Fixed Interest/Cash’ includes term deposits, but also includes listed bonds, government stock, bank bills and other types of fixed interest.

‘Equities’ is just a flash word for shares.

‘Property’ is not just your home (which we don’t include as an investment as you have to have somewhere to live), or other residential investment properties, but also includes investments in office blocks, retail (shops), wholesale (warehouses).  Making sure that you can access your money when you want, we use managed funds and listed property investments, so that you know that you can move your money easily and get access to it when you need it.

Diversify between New Zealand and Overseas companies.  The Gross Domestic Product of New Zealand is worth only 0.14% of the total world GDP.  Our financial markets are similarly just as tiny.  By limiting your investments to only New Zealand, you are limiting your returns from companies that are truly global (and that you might use in your day to day life like Facebook, Apple, Amazon, Nike) and have more growth potential.

Use different fund managers. A fund manager is someone like Milford, or ANZ, or Magellan.  These might be names that you have heard of. There are many fund managers (or investment managers) available for you to invest in, but very few offer ‘retail’ investments in New Zealand.  The best way to invest with these outstanding fund managers is through a WRAP (Wealth Retirement Accumulation Platform) through a financial planner.

Fund managers life and breathe their investment research and investment decisions.  They visit companies to find out what is happening, they often know about things that have happened before the media finds out – if they are good at doing their research.

Each fund manager tends to have a niche that they are specialists in.  For example, AMP Capital is a consistently good manager of Fixed Interest investments Milford, of New Zealand shares.  Therefore, the skill is in understanding what the fund managers are doing, how they work, what systems, processes, checks and balances they have in place.

Peter (Investment Research Manager) and Paul (Investment Research Associate), spend many hours visiting our existing and potential fund managers, participating in webinars, reading research and documentation  (as well as the rest of the research that our team does), to work out which are the most suitable fund managers to recommend to our clients.  Our fund managers are monitored consistently so that we are quickly alerted to any glitches or changes.

Lost’ Australian Super – first steps to change legislation so that this can be transferred to a New Zealand KiwiSaver (thanks to Chapman Tripp)

Australian ‘unclaimed super’ money gap to be plugged (10th June 2020 – Brief Counsel) The Taxation (Annual Rates for 2020/21, Feasibility Expenditure, and Remedial Matters) Bill, introduced toRead more

Changes to KiwiSaver this year

There have been a number of changes to KiwiSaver this year.  Some of these changes took effect on 1 April 2020: · All members aged 65 years or over can make a retirement withdrawal ·Read more

Things you may not know about KiwiSaver

1.    Get regular withdrawals from your KiwiSaver to fund your retirement spending When you reach the age of eligibility for New Zealand Superannuation (currently 65), you can access yourRead more

What does the ‘KiwiSaver Retirement Projection’ on your KiwiSaver Statement mean?

If you are aged between 18 & 64, from this year, you will receive some more information on your annual KiwiSaver Statement.  This ‘Retirement Projection’ information is a legislativeRead more

It really isn’t possible to ‘time’ the markets – investors with $1.4 billion in KiwiSaver funds learned this in March

When we meet with our Membership Fee clients on an annual basis, we consider the risk profile that their investments are invested in.  As your life changes, this may change.  We encourage our nonRead more

Coronavirus world, economic outlook and investments

This is a newsletter that was sent out on Monday May 11th 2020, to Moneyworks Financial Planning and Investment Clients that we work with on an ongoing basis.  It has quite a lot of interestingRead more

FIF/FDR Tax Regime on Overseas Investments

If you are liable to this tax regime (Your adviser will have told you, and your tax report will have a section with calculations on it as shown below), it is IMPORTANT that you read this guidance.Read more

PIE Tax

Your KiwiSaver and some other investments may be liable to PIE Tax. A PIE is a Portfolio Investment Entity. PIE Tax calculations are quite complicated – the important thing that you need to know isRead more

Tax Adjustments/Package available for indviduals and businesses under the Covid-19 Crisis Environment

The NZ Government has been using the tax system to provide assistance to people and businesses to deal with the Covid-19 Lockdown.  We have outlined the benefits announced to date below. There is aRead more

Questions about your KiwiSaver and Insurance under the Covid-19 environment?

Insurance policies All of the insurers that we work with and that our clients have insurance in place with (Life, Trauma, Income Protection/Mortgage Repayment and Health/Medical insurance) haveRead more

It is time in the market - NOT timing the market - the role of Finology in investing

It is tempting to stop making regular investments into markets when there is volatility and you hear the media pronouncing that the markets have 'crashed', 'plummeted', 'plunged', or even when theyRead more

Investment Markets and Recent Fluctuations

You will have heard comments in the media recently that the stock-markets have ‘had their worst day since the Global Financial Crisis in 2008’.  You may have noticed that your KiwiSaver andRead more
 

This product has been added to your cart

CHECKOUT