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.

Should New Zealand Superannuation continue to exist as it is?

Moneyworks was established in 1997, which was the same year that the referendum on compulsory superannuation was held as a result of Winston Peters negotiations to form a Government.  ThisRead more

Should adult children be able to challenge their parents wills?

You will have seen the headlines in the media about families at war over their parent’s wills.  The arguments of the Green familyRead more

The Dow Jones turns 125 years old

If you have been investing for some time - even it has just been in KiwiSaver, you will know that markets go up and down in value depending on market events, but over time they do increase.  This isRead more

Cyber Security issues and protections are getting far more important

As your financial adviser, we work with you to reach your goals, in particularly to get you to and through retirement - ethically (for those who want ethical investments).  But a big risk to yourRead more

Abuse of people knows no limits

We all know the stories of people being abused within closed doors, and New Zealand has the Family Violence Act (was Domestic Violence Act) to recognise the harm that abuse incurs. Email and socialRead more

Do you know what is in your insurance policy?

Fair Go and the media regularly cover situations where insurance companies don't  pay out on a claim.  Having been an intermediary between insurers and the insured party for 25 years, we have seenRead more

Some interesting things that we have read or listened to recently

This post is a little different, as it doesn't have a commentary on these articles, but they are interesting articles that might be worth a quick look at: How to dismantle the Absurd ProfitabilityRead more

Ethical Investing Update

As we have signalled, we are working on a big project this year to become internationally certified as Ethical Investment Advisers, and to be able to provide our clients with certainty over whatRead more

No more cheques - technology has taken over

You may be aware that I am quite a fan of technology and adapt technological advances (in the belief that it will make my life easier, but we all know that technology brings its own challenges - itRead more

Stuffing up NZ Super - make sure you get it right

This blog post comes from an excellent article written by Rob Stock that highlights how easy it is to muck up your New Zealand Super entitlements.  Here is a link to the article. Some important poiRead more

Investment Markets - updated graph

From time to time fund managers put together a wallchart for their advisers to hang in our offices for clients to see what has happened in investment markets over time. We feel that it is moreRead more

Is your PIE tax rate too high - going forward you can get a refund

A subtle change to PIE tax rules was delivered behind the scenes, which benefits investors.  If you get your PIE tax rate wrong and overpay your PIE tax, you will get a tax refund going forward.Read more
 

This product has been added to your cart

CHECKOUT