Informed Investor - Winter 2023 - The Risk Issue

UPWARD CURVE Women, money and education

SPEND GREEN Without breaking the bank

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ISSN 2744-6085

A FINE BALANCE How much risk is too much risk?

Kiwi crypto exchange • Could KiwiSaver calm recession? • The question of capital gains

Join host Darcy Ungaro AND GUESTS EACH WEEK Re-framing how we invest for tomorrow

Past guests include Jim Rickards, James Shaw, Robin Oliver, Tony Alexander, Michael Every, Oliver Hartwich, Sam Stubbs, Jarrod Kerr, Jenee Tibshraeny, David Seymour, Paul Goldsmith, Jerome Faury, Christian Keroles, Willy Woo, Paul Salisbury, Andrew Nicol, Mike Taylor, Janine Grainger, Ed McKnight, Sharon Zollner, David Tripe, Sarn Elliot, Jarrod Kerr, Ruth Henderson, Frances Cook, Simon Collins, Tom Botica, Ashley Church, Jeremy Couchman, Rich Elliott, Martin Hawes, Warren Couillault, Cole Hauptfuhrer, Greg Fleming, Colin Magee, Kevin Carter, Aditya Das, Reuben Steff, Naomi Ballantyne, Tim Edwards, Chris Howard, Tom Hartmann, Andrew Malcolm, Blandon Leung, Michael Reddell, Scott McLiver, Konrad Hurren, Will Remor, David Boyle, Craig McColl, Tim Warren, Ryan Bessemer, Robert Sloan, Richard Klipin, Natalie Ferguson, Kristin Lunman, Anthony Edmonds, Rupert Carlyon, Dean Anderson, Claire Matthews, Dean Anderson, Liz Koh, Ralph Stewart, Mark Pascall, Catherine Emerson, Rupert Gough, Roger Kerr, Ananish Chaudhuri, Geoff Caradus, Hamesh Sharma, Julian McCormack, Chris Tenant-Brown, Vitaliy Katsanelson, Andrew Duncan, Shaun Drylie, Clive Fernandez, Di Papadopoulos, Adrienne Church, Andy Pickering, Rob Henin, Campbell Pentney, Dave Corbet, Andy Higgs, Sam Blackmore, Leanna Kohn-Hardie, Stephen Hart, Simeon Burnett, Daniel Kieser, Lance Wiggs, Paul Manning, Tim Preston, Zainab Radhi, John Bolton, James Fuller, Robbie Paul, Brooke Roberts, and more!

Find out more: ungaro.co.nz/nzeverydayinvestor

I N F O R M E D I NVESTO R

Contents IN THIS ISSUE

12. What We Like Flexible vehicle options from SIXT, tasty winter gin ideas, DIY wealth-building course.

14. Essentials Our picks for getting cosy indoors this winter.

16. The Curve Victoria Harris looks at the investment edge women have.

18. Going Up, Going Down Economist Cameron Bagrie reviews NZ Inc and where we’re at.

22. The Right Amount of Risk Martin Hawes discusses finding your right level of risk.

26. Is it Safe Out There?

Amy Hamilton Chadwick with everything you need to know about risk and reward.

34. Risk Management Identifying, mitigating and managing risk is vital when it comes to investing. Mike Taylor explains five key principles for guiding investment choices.

36. Spending Greener Buying less, shopping local and being smart about energy use are just some of the ways you can help.

38. Is Risk-Aversion Costing You? Ben Tutty looks at Kiwis’ historically conservative investment approach.

44. The Crypto Wave The rally in cryptocurrencies still faces downside risks, writes Tina Teng.

48. The Question of Capital Gains Tax Unpacking both sides of the CGT debate.

52. Mitigating Risk in Climate Change Investment in resilient systems is essential for minimising risk in Pacific Islands.

54. Crypto the Kiwi Way Joanna Mathers speaks to Easy Crypto about their alternative to the clunky crypto exchange.

56. Pitfalls of Cash as King Emotionally cash might feel right, just now, strategically it’s not, writes Ralph Stewart.

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58. Changing Attitudes to Insurance Clarissa Hirst on how recent events have opened our eyes to the need for insurance.

62. Banking Woes Andrew Kenningham takes a closer look at the recent US and Swiss bank failures.

66. Snapshot What’s impacting the global economy right now?

69. Insurance Industry Spotlight Sacha Cowlrick explains how the insurance industry works.

70. KiwiSaver’s Extra Benefits Simplicity’s Sam Stubbs explains the positive GDP impact of our growing KiwiSavers.

72. Are You Taking Enough Risk?

Ed McKnight looks at leverage and calculated risk.

74. The Intention-Action Gap Money Mentalist Lynda Moore on committing to change.

76. KiwiSaver for the Self-Employed Sole traders, freelancers, contractors – don’t let KiwiSaver be an afterthought.

78. Managing that Home-Country Bias It’s great to support local when investing, but not exclusively.

We’re more than a tourist in New Zealand.

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I N F O R M E D I NVESTO R

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Contents 81.

Naked Letting is Here The Rental Bureau explain their entirely virtual service for hands-on landlords.

82.

Property Market Review Kelvin Davidson on previous market downturns and how our recovery could look.

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Time to Think in Commercial World Investors will benefit from a frank chat with prospective or existing tenants in the coming months, writes Andrew Logie.

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Short-Term Rental Demand A big jump in nightly rates suggests a shortage of short-term lets, writes Stefan Nikolic.

90. How Much to Pay for Risk Insurance Bill McGavock has a 3-step guide to balancing cover level and cost.

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The Problems with New-Builds Andrew Nicol is all for new-build investments but cautions to be aware of the snags.

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Fashion Update Get wrapped up in style for the cooler months.

96. Beating Burnout Resilience Retreats on Lake Karapiro talk easing stress and re-establishing balance.

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Wairarapa Wandering Joanna Mathers explores Greytown and Featherston in comfort and style.

100. Porsche’s Taycan EV Liz Dobson finds it is possible to produce a sportscar in our electric world.

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103. Restaurant Review Cordis Auckland Hotel’s Eight restaurant scores a 10 with us.

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EDITOR’S LET TER

Exploring the World of Risk

Published by: Opes Media Informed Investor 33 Federal Street, Auckland Central, Auckland. www.informedinvestor.co.nz

Finding the ideal balance between inertia and recklessness when it comes to money is a fine art, but is worth pursuing, so let’s take a close look this winter.

Risk is a condition of living. It’s all around us, every day. A risk-free life would be a hermetically-sealed bubble, a life spent in bed, under the covers.

The other end of the risk spectrum is exhilarating. Leaping from planes, climbing cliffs, trekking through jungles – it gives life colour, texture, and lurches of joy … that is until you get eaten by a tiger or bitten by a snake.

Our winter issue is all about risk. Our lead story, by Amy Hamilton Chadwick, explores the balance between inertia and recklessness when it comes to money; that sweet spot where money works for you, but doesn’t send you bankrupt.

Amy sums it up eloquently: “Whatever you do with your money, you’re taking risks. At one end of the risk spectrum there are high-risk investments that can provide huge returns but leave you at risk of losing everything you put in … at the other end of the spectrum, there are strategies like putting all your money in a savings account, leaving you at risk of saving too little to achieve your financial goals.

Everyone needs to find the right balance between those two extremes.”

Our appetite for risk, Amy discovers, is shaped by many things. Genetics, life experiences, parental attitudes. And it can change over time: what may seem a great idea at 25, may seem foolhardy at the age of 50.

poured $1.5 trillion into housing because it’s seen as a safe haven.

But could this cost us? Volatile investments, over time, can pay off with much higher rewards than the slow and steady approach. It’s all about getting the right advice. Ben Tutty investigates whether we should be more courageous with our money, and the dangers inherent in not taking risk.

We also welcome back Victoria Harris to the Informed Investor fold. In her capacity as founder of The Curve, a service dedicated to educating women around money, she will be sharing her insights. The Curve is doing some great work around women and wealth, and hopefully she will inspire some our female readers to improve and sharpen their financial skills.

Women, traditionally, haven’t had a large role as investors, and it’s time for that to change.

Readers may not be aware that Informed Investor has a great website, informedinvestor.co.nz.

As an adjunct to this, we have launched a new fortnightly newsletter, Stay Informed, with exclusive content not available anywhere else.

We’d love you to read it; just provide your email address at the bottom of the Informed Investor website homepage.

We hope you enjoy reading the winter issue of Informed Investor – curl up by the fire and dig in.

All the best.

As a nation we tend to be conservative when it comes to finance. Only a quarter of women and a third of men describe themselves as aggressive or growth investors, according to Financial Services Council surveys. We’ve also

Joanna Mathers Editor

Editor Joanna Mathers

Resident economist Ed McKnight

Art Director Mark Glover

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This magazine is subject to NZ Media Council procedures. A complaint must first be directed in writing, within one month of publication, to the email address, stephanie@informedinvestor.co.nz.

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Informed Investor is an investment magazine published quarterly by Opes Media. You need Informed Investor’s written permission to reproduce any part of the magazine.

Advertising statements and editorial opinions in Informed Investor reflect the views of the advertisers and editorial contributors, not Informed Investor and its staff.

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PRINT ISSN 2744-6085 DIGITAL ISSN 2744-6093

UP FRONT

Meet Some of Our Contributors CAMERON BAGRIE

KELVIN DAVIDSON

Cameron is the managing director of Bagrie Economics, a boutique research firm. He was previously chief economist at ANZ, a position he held for over 11 years.

Kelvin joined CoreLogic in March 2018 as senior research analyst, before moving into his current role of chief economist. He brings with him a wealth of experience, having spent 15 years working largely in private sector economic consultancies in both New Zealand and the UK.

MARTIN HAWES

ANDREW KENNINGHAM

Martin is the chairman of the Summer KiwiSaver Investment Committee.

He’s an authorised financial adviser and offers his services throughout New Zealand.

Andrew is the chief Europe economist for Capital Economics.

He was previously an economic adviser for the United Kingdom Foreign Exchange.

ANDREW NICOL

CHRIS SMITH

Andrew is an authorised financial adviser and the managing partner of Opes Partners. He has more than 15 years’ experience in banking, finance, and property.

Chris is the general manager at CMC Markets. He has more than 15 years’ investing experience in financial markets, global equity, commodity, and forex markets.

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C ONTRIBUTORS

CLARISSA HIRST

VICTORIA HARRIS

Clarissa is the FSC’s head of content, communications and marketing. She also runs point on the FSC’s research, diversity and inclusion initiatives, media and government relations, and consumer projects.

Former portfolio manager at Devon Funds, Victoria is co-founder of The Curve, a digital platform aimed at educating women around money.

ED MCKNIGHT

LYNDA MOORE

Ed McKnight is Informed Investor’s economist.

After working for the Auckland Philharmonia and Hatch, he now crunches data for Opes Partners.

Lynda Moore spent 20 years in her own accounting practice before co-founding Money Mentalist. She blends psychology and neuroscience with money coaching.

MIKE TAYLOR

BEN TUTTY

Mike is the founder and CEO of Pie Funds. He’s also portfolio manager of Pie Funds’ Chairman’s, Global Growth 2 and Conservative funds.

Ben is an Auckland-based but not Auckland-bound property investor and freelance writer. He’s travelled and worked across Asia, Europe, and Australasia, writing for some of the biggest names in property and finance.

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U P GFU RL OA NR TS RE

What We Like

Showcase of the cool stuff that’s caught our eye recently.

New cars on the block SIXT is a premium and very flexible car rental and subscription business that’s launched in New Zealand.

The first company of its kind bringing Kiwis ultra-flexible car usage options for premium, specialist and electric vehicles, SIXT provides solutions for holidays, weekends or even your daily commute.

Their services range from short-term rentals (for weekend roadies or out of town holidays) to monthly or yearly all-inclusive “subscription” packages.

SIXT gives you ultimate flexibility to drive what you want when you want.

Part of the Giltrap Group in New Zealand, SIXT has an extensive range of vehicles on offer including Audi, Mercedes, Aston Martin, Polestar and McLaren, so you can drive the car of your dreams without needing to buy it. With locations in Auckland, Christchurch, Wellington, Dunedin and Queenstown, and allinclusive packages available, SIXT adjusts to your needs, making car rental easier and better.

Our editor Joanna recently cruised around Wellington in style in a sleek Mercedes GLE thanks to SIXT. Check out more of her getaway in the Travel section.

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W H AT W E L I K E

Winter warmer Who said gin is just for summer? One of New Zealand’s most beloved craft gins, Lighthouse, is shaking things up this winter and inspiring all of us to make a comforting mulled gin that packs a punch.

New Zealand’s first female head distiller, Rachel Hall, has been perfecting the Original 42% gin since 2014, using spring water filtered by the Remutaka Ranges and yen ben lemons to create that hallmark London dry style with a Kiwi twist.

Over these cooler months Rachel is drinking it with cinnamon, honey, apple juice, oranges and chamomile teabags to create the most mouth-watering winter cocktail.

New Wealth Foundations Ungaro has developed a new course called New Wealth Foundations, a self-directed personal finance course designed specifically for DIY wealth-builders. Under the guidance of two qualified financial advisers, you delve into the critical aspects of personal finance, including: Conditioning your cash flow: Learning how to effectively manage your income and expenses, paving the way for a stronger financial foundation and increased savings.

• Goal setting: Defining clear, attainable financial goals that align with your unique aspirations, ensuring you stay focused and motivated on your path to financial success.

• Managed funds: Gaining insights into the world of managed funds to help grow your wealth.

• Alternative investments: Broadening your investment horizons by uncovering the potential of alternative assets, such as property, commodities and crypto, providing you with diversified opportunities to maximise returns.

New Wealth Foundations is a great resource for those committed to a bright financial future, whether you’re just starting your journey or seeking to expand your financial knowledge.

You can sign up at www.ungaro.co.nz/ugro

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ESSENTIALS

Time to Settle In

Winter is a wonderful season to make the most of the indoors.

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1. Diptyque l'eau papier edt – www.meccabeauty.co.nz, 2. Hubsch string magazine holder – kayustudio.co.nz, 3. Pansy linen duvet cover – www.cittadesign.com, 4. Kobe fluted glass sideboard – www.humbleandgrand.co.nz, 5. Lukeke x Karen Walker mini bubble bud vase – www.karenwalker.com, 6. Maison Margiela by the fireplace candle – www.meccabeauty.co.nz, 7. Simon James seam table light by Serax – simonjames.co.nz, 8. Boston four-seater sofa in cement – www.achomestore.co.nz WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 1 4

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Make it Pop

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Resene Urbane

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Resene Botticelli

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Resene Xanadu

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Resene Heatwave

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Bright accents and cooling whites for hip home highlights.

9. Floral dreaming PET place mat – earlysettler.co.nz, 10. Median table lamp – www.achomestore.co.nz, 11. Mother made pm mushroom powder – www.superette.co.nz, 12. Leather sling chair – kayustudio.co.nz, 13. Aesop reverence aromatique hand balm – www.aesop.com, 14. Simon James echasse vase by Menu – simonjames.co.nz, 15. Molteni&C d.151.4 armchair – www.dawsonandco.nz, 16. The flora stump – kayustudio.co.nz, 17. Tie knot baguette bag – www.achomestore.co.nz

resene.co.nz/colorshops

THE CURVE

The Strength of Financial Know-How Women are just as capable of finding growing investing trends and themes and can spot overlooked ones, writes Victoria Harris, of The Curve.

Investing isn’t just about money ... it’s much broader. It’s about investing in yourself, investing in your future and investing in your financial wellbeing. Financial wellbeing is crucial to a woman’s confidence; if she has financial confidence, she feels empowered.

I learned about investing when I was in primary school. I was very fortunate to have parents who had bought me a small number of shares and I used to receive a small dividend cheque a few times a year in the mail.

I thought investing was just sitting back and getting money in the letterbox. Technically, I wasn’t wrong, but I wasn’t entirely right either; I didn’t fully understand investing to generate wealth or its real-life relevance until much later.

Fast-forward to today and I have been in the finance industry for over a decade. For the same amount of time I have seen women around me struggle with confidence when it comes to talking about their finances and building their wealth. Why? Daunting task For generations women have been left behind when it comes to discussions around money and investing. This stems back to when men were historically the breadwinners and therefore the main contributors to the household income.

Today, women are much more independent and equally present in the workforce but still behind when it comes to financial literacy.

Starting your investing journey can seem quite daunting. Common questions we get asked by women are “Where do I start?”,

“Have I missed the boat?” and “What should I invest in?” The main piece of advice we give is: open your eyes, look around you.

Investing opportunities (surprisingly) can be right in front of you.

It might sound obvious, and it should be.

“Invest in what you know” is a quote from one of the first investment books I read by guru Peter Lynch. He was quoted saying this nearly 40 years ago, and I think it is still relevant in today’s world.

It means invest in what you understand and invest in what you use. Have you started using a new product, or noticed a lot of your friends using a new app? If we look at some of the highest returning companies over the last few decades, many have products or services we use most days (Amazon, Netflix, Microsoft) to name a few examples. By using these products/services you are researching investing ideas without realising it.

Investing edge Women are just as capable at spotting growing investing trends and themes as men. We might even spot ones they have overlooked. For example, we might spot a new technology that could benefit the next generation of women, or we might see a specific womenswear retail chain full of customers and rapidly expanding its store footprint.

As women, this is our difference. This is our investing edge.

One example I often refer to is lululemon.

The share price of this athleisure company has risen from $US40 to $US400 over 10 years. In other words, you could have turned $10,000 into $100,000 if you had noticed

lululemon becoming more popular at the gym, the pilates studio (and in cafes) 10 years ago. So, what are you noticing now?

What will be the next lululemon?

No matter your gender, race, ethnicity or age, you can identify different investing trends and therefore have the tools and knowledge to grow your wealth. So, to all those women who may think they have missed the boat, you already have more investing knowledge than you realise.

Jargon and graphs The world of finance can be full of jargon and complicated graphs. But it isn’t as intimidating as you may think. You are probably already “researching” investment ideas every day.

If there was ever a time to feel optimistic about the future, it’s now. I see a future where investing is more openly talked about by women and men, and children are educated in schools about spending, saving and investing. The benefit of this would flow down from generation to generation, changing the shape of society.

Understanding how to grow our money can be so empowering. Not only does it improve your confidence, it leads to financial independence, flexibility and choice. It gives women more control over their lives and it gives them freedom.

Women especially need to be strong advocates for themselves in looking after their financial futures. So let’s educate together. Let’s create a generation of women where simple information flows, smart conversations are had and financial independence is gained.

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UP FRONT

Going Up, Going Down Economist Cameron Bagrie takes a good, hard look at New Zealand and how we’re going as a nation.

Moving in the right direction The annual inflation rate eased to 6.7 per cent, the first time it has fallen below 7 per cent in almost a year. Lower fuel prices and some discounting helped. Various core measures, which strip out volatile items such as fuel, eased a tad. But there remains a sticky element to inflation, with non-tradable or domestic inflation and what the Reserve Bank really influences accelerating to 6.8 per cent from 6.6 per cent. Service sector inflation, which is influenced by wage costs, rose from 6 per cent to 6.1 per cent.

What does rising interest rates really mean?

Higher interest rates hit borrowers, but there is another angle: you now need to take real risk to make real money. That doesn’t seem like a bad thing. Making money without taking real risk when interest rates were low and kept asset prices heading north just made life too easy and, in many instances, artificially camouflaged poor investment decisions.

Take that A helping hand The Reserve Bank is looking for help from the government in their crusade against inflation.

Spending more will add to demand and inflation.

Better migration settings, less spending, and welfare reform are examples of initiatives that could help.

A 50 basis points hike in April from the Reserve Bank sent a clear message: inflation is still too high. The antidote is unfortunately a deeper economic adjustment and hitting mortgage holders is one avenue monetary policy works through. Mind you, with inflation now heading lower, the question will be asked, has the Reserve Bank now done too much?

Containing spending is difficult though when cost of living price increases are requiring sizeable public sector pay increases, society is demanding cost-of-living support, maintaining government service levels just costs more, and an election is around the corner. The more the government spends, the more work the Reserve Bank must do.

A wall of pain A significant number of mortgage holders will refinance in the coming year. This includes around $120 billion of owner-occupier loans and almost $50 billion of property investor loans, representing almost 50 per cent of all loans. The yield on bank fixed mortgage books was 4.37 per cent in February, up from a low of 2.8 per cent. Fixed lending rates are above 6 per cent. Ouch!

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We’re back Provisional migration estimates for the year ended February 2023 were arrivals of 152,900 and departures of 100,900, netting an annual migration gain of 52,000 compared with a net loss of 19,900 a year ago. That resembles preCovid numbers and will add to housing demand.

MARKET INSIGHTS

Looking for a base

Boosting up

House prices continue to fall, with the REINZ house price index dropping 0.9 per cent in March, taking the annual decline to 13.1 per cent and 16 per cent down from the late 2021 peak. However, there were some signs in the data of a base being near, with the volume of sales rising in the month and median days to sell easing lower, although remaining well above average. Auction clearance rates in Auckland are lifting, we have surging migration and the interest rate cycle is close to peaking.

We await the boost to construction from Cyclone Gabrielle and earlier floods in Auckland. While one element is that the construction sector (residential) is turning down, it is about to get a sizeable leg up from Mother Naturerelated events.

Divided we fall Tough times and difficult decisions are around the corner. Drop the recession narrative and let’s talk about a reset, which could unlock opportunities. Effective policymaking and stable political institutions enable governments to make difficult decision in times of economic challenge and take measures to correct imbalances.

Division across an economy, politics and society does not, which is what we have.

How we heal as a nation could be a real challenge. Division will exacerbate and prolong economic challenges.

Looking for the strain Bank non-performing loans remain low at 0.4 per cent of total lending.

For housing, 0.3 per cent of loans are characterised as non-performing. While we can point to the odd article involving collapsed construction companies, we are not yet seeing real stress. That could be the 2024 story, not 2023.

Monetary policy (interest rates) take time to hit the economy.

Turning down The residential construction cycle is turning. There were 2,972 new homes consented in February 2023, down 29 per cent compared with February 2022. The trend is down. In seasonally adjusted terms, the number of new homes consented in February 2023 fell 9 per cent compared with January 2023. This follows a seasonally adjusted fall of 5.2 per cent in January 2023.

The International Monetary Fund is projecting sub-par growth over the coming years for the global economy, but growth nonetheless, and issued the following warning. “The risks are weighted heavily to the downside, in large part because of the financial turmoil of the last month and a half,” said Pierre-Olivier Gourinchas, the fund’s chief economist. “That is under control as of now, but we are concerned that this could result in a sharper and a more elevated downturn if financial conditions were to worsen significantly.”

While Bagrie Economics uses all reasonable endeavours in producing reports to ensure the information is as accurate as practicable, Bagrie Economics shall not be liable for any loss or damage sustained by any person relying on such work whatever the cause of such loss or damage. Data and information have been gathered from sources Bagrie Economics believes to be reliable. The content does not constitute advice.

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Correct as at 1 May 2023.

Buckle up

UP FRONT

Risk /’risk/ noun

‘The chance that an investment (such as a stock or commodity) will lose value.’

– Merriam-Webster Dictionary

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QUOTE & DEFINITION

‘The biggest risk is not taking any risk. In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.’

– Mark Zuckerberg

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I NVESTM E NT

Taking the Right Amount of Risk There’s no such thing as a risk-free investment, but it’s important to find the right level for you, writes Martin Hawes.

You can never completely avoid risk … nothing ever happens without someone taking on risk.

This is true whatever the endeavour, from the most mundane (going and getting the groceries) through to high finance, there is risk. We can try to reduce or mitigate risk, but we can never entirely prevent it.

Most people know this principle applies to investment. All investments have risk; there is no such thing as a risk-free investment.

Investors are paid to take risk; no risk means no returns.

Risk and return are twins; you cannot have one without the other. Investors need to be sure they take the right amount of risk and that they are properly rewarded for the risk taken.

I think investors should think of investment risk being either permanent loss or temporary loss. Obviously one of these is a lot worse than the other – most of us can tolerate some temporary loss, but few can manage permanent loss.

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F E AT U R E S

‘The most common cause of permanent loss is when people are rattled by a major slump.’

A single asset (e.g. one stock on the share market, a business or a rental property) has a greater chance of permanent loss than a diversified portfolio which contains hundreds or even thousands of different companies. However, you should be aware that even a well-diversified portfolio has the possibility of permanent loss. This is not because all those hundreds or thousand of companies may go broke – that has virtually no chance of happening.

Temporary losses However, that well-diversified portfolio could give permanent loss if you sell at the wrong time. Such sales can turn temporary loss (caused by volatility of the markets) into permanent loss.

Temporary losses happen all the time for investors. Markets are volatile; they go up and they go down, sometimes on a minuteby-minute basis. Few investors worry about the small short-term ups and downs. It is when that big slump comes along and their investments are down 20 per cent or more that some people start to worry. Worse, when a major slump happens, the media starts to talk doomsday – there is a wall of negative noise and it can seem like the world is about to collapse into Armageddon.

In fact the most common cause of permanent loss is when people are rattled out of their investments by a major slump.

This slump can cause fear (or even blind panic) and many find they have been taking more risk than they can tolerate. That causes some to sell.

We may know that we are supposed to buy in gloom and sell in boom, but many people do precisely the opposite. They buy when times are buoyant and the market’s humming along and sell into a slump. In doing so they are buying high and selling low and as such may show losses on their investments.

A good example of this was with KiwiSaver in 2020. In the Covid share market fall thousands of people reportedly moved their KiwiSaver accounts to less aggressive settings, from (say) a growth fund to conservative. In effect these people found they have a lower tolerance for risk than they thought they had. They have been diversified but have not assessed their risk WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 2 4

properly and, inevitably, a slump finds them out.

Volatile markets Selling like this makes their losses permanent. When they go from a growth fund to a conservative fund they are effectively selling some of the shares that are in the fund. That means they did not own enough shares when the slump abated and the markets went back up. They could not make good their losses and selling made their losses permanent.

So, recognise that you will have risk; markets will be volatile and there is nothing that investors or the people who manage funds can do about that volatility.

You need to take risk and, of course, the greater the risk you take the higher the returns you should expect (investors are rewarded for risking their money).

Remember, selling into a slump is bad. It turns a temporary loss into a permanent one.

The only thing you can do is have investments that have the right amount of risk, an amount that you can tolerate. It is important you let a tolerable amount of risk set your investment strategy rather than set the strategy by the returns you want.

The most important thing you can do is assess your tolerance for risk before you start to invest. There are many risk calculator apps available. The website Sorted has one and many KiwiSaver providers have them on their websites.

Spend a few minutes filling in a simple form that will tell you your tolerance for risk, and how you should invest.

Martin Hawes is a financial author and speaker. He is not a Financial Advice Provider nor a Financial Adviser. The information contained in this article is general in nature and is not intended to be financial advice. Before making any financial decisions you should consult a professional financial adviser. Nothing in this article is, or should be taken as, an offer, invitation or recommendation to buy, sell or retain a regulated financial product.

See the investments catalogue online https://pacifictradeinvest.com/en/investment-opportunities/

RISK

Is it Safe Out There?

You need to know how much investment risk you’re comfortable with, what type of risks you’re willing to take, and what risk fits your objectives, writes Amy Hamilton Chadwick.

At university in her late teens, Meredith* decided to try investing in shares. She spent $2,000 on shares in two companies she liked the look of.

Unfortunately, the dotcom bubble collapsed and the value of her shares went to almost zero. More than 20 years later, Meredith still won’t invest in shares; she believes it’s just too risky. She now has over $300,000 in savings – all of it in the bank.

If you understand a bit about investing, you can see where Meredith went wrong initially, and where she’s going wrong now. Despite being a very intelligent person with a master’s degree and an excellent career, Meredith has flipped between taking too much risk and too little. Naturally risk-averse, she’s now doing almost nothing with her money, certain that if she makes any move something bad is just around the corner.

“People at work tell me about all the money they’re making in their investments, but they’re all doing different things, so it’s very confusing,” she says. “I keep thinking that maybe I should buy a house. But what if I do that and then I lose my job? The outlook isn’t that good … It could easily happen.”

Risk is unavoidable Keeping her money in the bank makes Meredith feel safe, because it seems like a

zero risk strategy. But she’s simply taking a different, less obvious risk. As her savings are eroded by inflation and she misses out on opportunities to put her savings to work, she’s risking a retirement with too little income to maintain her lifestyle.

Whatever you do with your money, you’re taking risks. At one end of the risk spectrum there are high-risk investments that can provide huge returns but leave you at risk of losing everything you put in – such as putting all your money into a single start-up.

At the other end of the spectrum, there are strategies like putting all your money in a savings account, leaving you at risk of saving too little to achieve your financial goals.

Everyone needs to find the right balance between those two extremes.

You need to know how much risk you’re comfortable with, what type of risks you’re willing to take, and what kind of risk fits with your financial objectives.

“You don’t want to take risks that make you feel like you’re living on the edge of a cliff all the time,” says Michael Cave, director of Cave Financial. “But the market also rewards you for taking some risk. So it needs to be calculated risk, ideally taken once you’ve built some financial resilience, so when market shocks do come, you’ve allowed for that.”

‘For some people, a big mortgage keeps them awake at night.’ – Michael Cave WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 2 7

F E AT U R E S

Risk-taker or risk-avoider?

Cave has met people all along the risk-taking spectrum: “For some people, a big mortgage keeps them awake at night, while others spend more time worrying about how to create the most wealth. There are also conspiracy theorists who think the banks are going to collapse, so they don’t take loans and instead buy gold.

“With my clients, I spend time both reassuring people who are taking reasonable risks, and talking to people who want to take risks that I think are too high for their situation.”

He believes our personal risk appetites are shaped by genetics and our experiences, especially the money lessons we learn from our parents. Our risk appetite can change over time; you might get more conservative as you WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 2 8

approach retirement, or more comfortable with risk as your financial literacy and wealth grows.

Donna Nicolof, CEO of Pāua Wealth Management, bought her first apartment at the age of 17 and remembers how scary it felt: “I had a mortgage of $167,000 and it felt massive at the time – it was more money than I could ever imagine earning. I thought, ‘How am I going to pay this?’”

But time is an investor’s best friend, and that first purchase helped Nicolof get started on understanding and growing her appetite for risk. By knowing how much risk you can tolerate, you can make decisions about how to deploy the money you’ve got to help you achieve your investment goals and objectives, she says.

‘Personal risk appetites are shaped by genetics and our experiences.’

RISK

“Of all the conversations we have, risk is the single most important. It solves a lot of problems in the future, because markets are not linear. The worst thing you can do is panic when markets are down and sell, which only potentially realises your unrealised losses.

We don’t want people making rash decisions because we haven’t had sufficient time to explore what their real appetite for risk is.”

The power of knowledge Our perception of risk is not only shaped by our personal feelings, but also by what’s going on around us. The news tends to report on negative forecasts, playing to our fears. It’s important to try to filter out the noise from the media, says Cave, and stick to your own plans and goals. Instead of reading the headlines, financial advisers rely on data to illustrate risks in a less emotive and more measurable way.

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F E AT U R E S

For instance, financial advisers use models showing expected returns from various investment strategies, including best-case and worst-case scenarios, so you can make comparisons.

two individual companies. That lack of diversification hit her hard; if she had that money in an index fund or ETF, her result would probably have been quite different and she might feel more confident now.

“Don’t look at the data every day,” Cave says. “Look at the long-term trend and the mathematical risk – it’s not a guarantee, but it’s an indication.”

Diversification is a powerful way to mitigate risk, because it spreads risk. For most investors, this means having a range of investment types from relatively low risk and low return, through to higher risk and higher return. Those higher-risk niche investments typically make up just 5 per cent of an individual’s portfolio, or less. In some cases they might only put in money that they’re prepared to lose.

For Nicolof, it’s also important to use metrics that make it real for people to feel familiar. It’s not enough to ask clients, “How would you feel if you saw the market had dropped 20 per cent in a day?” Instead, she puts it in dollar terms: “How would you feel if your $100,000 had dropped to $80,000 overnight?” If that would make you feel sick, it might not be the right strategy investment for you.

Diversification the key Meredith’s mistake in her early investment loss was putting all her money into WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 3 0

Nicolof puts around 1 per cent of her portfolio into riskier investments like direct investments or start-ups venture capital.

Even knowing she may never get the money back, she considers it partly an investment in her education because she learns about a new asset class, industry or product and supports New Zealand innovation.

Homework time Learning about an investment is the best way to understand the specific risks involved – you have more context about the numbers, you get to know what could make the returns rise or fall, and you can see the long-term prospects for the investment.

“Do not invest in anything you don’t understand,” Nicolof advises. “If you’re not sure, seek professional advice, speak to someone who does know. If they’re worth their salt, they should be able to explain it.

“My son is 15 and recently he started a small share portfolio. I said, ‘I’m happy for you to invest your savings, but each time you invest you need to make a case to me around what you like about the investment and why.’ Unless you do your research, you’re just gambling.” *Name changed for privacy.

RISK

Don’t fall in love with one company For people who want a higher-risk investment with potentially high returns, venture capital has always been an exciting asset class. Start-up companies have a high failure rate; around 90 per cent or even higher. But those who do succeed can make up for the failures, while a rare few will wildly outperform other types of investments; billion-dollar start-ups are called unicorns because they’re extremely rare.

"Venture capital investors know the risks, and they enjoy being involved with exciting innovative Kiwi start-ups," says Jack McQuire, partner at Icehouse Ventures.

Questions on risk When you’re considering your own approach to risk, there are three basic questions to get you started: 1. How much do you have to invest?

The first step in establishing how much risk you want to take is figuring out how much you want to invest. That will give you a sense of your financial capacity for risk-taking.

“Take the time to understand your balance sheet,” says Nicolof. “Understand what your operating budget is, so you know how much money you need to live on and how much you have to invest. This pre-work forms a good basis for thinking about the risk conversation.”

2. When do you need the money?

If you have a short timeline, you need to make sure your money is available when you need it. Instead of worrying about high returns, the priority will be security of funds. For example, someone who wants to go on an OE in six months might keep their savings in the bank, rather than in the share market.

The funds are there for their trip when they’re needed, even if they didn’t grow.

With a long time frame, returns can become more of a priority, since you have time to ride out market volatility. With three decades until retirement, you’ll have a different approach to risk than someone who has only three years before they retire.

“Time is an important part of risk,” says Cave. “If you have a deadline for your money, you need low-risk strategies. With a distant timeline, you can take a bit of risk and reap the rewards.”

3. Do you understand the risks you’re taking?

Before you put your hard-earned money into any investment, you should make sure you know what you’re getting yourself into.

Ideally, talk to a financial adviser to get a better idea of the risks – or, if you have the time and the interest, do your own research. Everything you do with your money has its risks, and the better you understand them, the more wellinformed your decision-making can be.

“You’ll never make perfect decisions,” Cave adds, “but with good advice and information, you can set your risk level appropriately.”

“The return is more than just financial, because investors genuinely see how their money is creating a significant positive impact on the world. We have start-ups involved in environmental clean-up, green energy, creating high-tech jobs and generating export revenue. It’s exciting for investors to be part of something new and they’re motivated beyond just returns.”

One of the risks investors face is becoming too invested in the positive potential: “People do diversify, across 10 or 20 investments.

Then they get a favourite and put in 20 times more money – so if that company falls over, most of their money is gone. That’s a mistake we see too many times, so don’t fall in love with one company.”

The most successful investors diversify across industries and take a long-term perspective on investing in new companies: “Investors should think about spreading their capital across an entire economic cycle, and building it up over 10 years.”

And for the founders of the start-ups themselves, the risk is even higher. They have little opportunity to diversify as they build their companies, because without committing 100 per cent to their business, it won’t become a success.

“Honestly, our advice to founders is: ‘Do you really want to do this?’ It’s bloody hard graft, and it’s thankless. They’re putting their careers on the line and taking a huge risk.

The founders we’ve seen go the distance are all-in on their mission and have a mindset to de-risk every possible aspect of their business over time.

“They also know there’s a fine line between trying to know everything and taking action at the right time. You can always do more research, but at some point you need to make a decision – because every second you’re losing ground to competitors or technology.”

Principle

5 PRINCIPLES FOR GROWTH

Mike Taylor Founder and CIO

*As at 30 April 2023. Pie Funds opened its first fund on 3 December 2007. Past performance is not a reliable indicator of future performance. Returns can be negative as well as positive and returns over different periods may vary. View the Product Disclosure Statement plus our duties and complaints process and how disputes are resolved at www.piefunds.co.nz.

We love to see skin in the game 2023 has seen a tentative recovery in stocks, despite interest rate hikes and inflation putting pressure on day-to-day spending.

This recovery has been led by mega-cap tech, with investors becoming enthusiastic about the rapid advancements in AI and the potential for improved margins going forward.

We use five key principles to guide our investment choices.

Principle one is we love to see skin in the game. When you invest with Pie Funds, you invest alongside us. We invest like it’s our own money because it is. Over $120m* of the money we manage comes from our staff, directors and shareholders.

We also look for this commitment in companies we invest in. We love companies where managers are heavily invested, including financially. They often have extra

passion for the company that can give it an edge in the market.

We have refined these five key principles over the past 15 years since Pie Funds launched in 2007.

As active management specialists, we stick to these principles when markets are up and when they’re down too. Our funds typically have a small number of investments, with most around 25-35 small to mid-cap stocks.

These stocks form the majority of the investments held by our funds, meaning our global investment team backs these as our best picks. These concentrated portfolios are higher risk but aim to deliver clients higher rewards.

In these uncertain times, many clients recommended we share our principles more widely. Check out our website to learn about other principles and, if you would like to find out more, we invite you to visit our offices.

Contact us on 09 486 1701 or email clients@piefunds.co.nz to find out how we can help you.

PIEFUNDS.CO.NZ

Pie Funds Management Limited is the manager of the funds in the Pie Funds Management Scheme. Any advice is given by Pie Funds Management Limited and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice.

As manager of the Pie Funds Management Scheme investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you.

PIE FUNDS

Risk is a Natural Part of Investing; How You Manage it is the Key Idenitfying, mitigating and managing risk is vital when it comes to investing.

Mike Taylor explains five key principles for guiding investment choices.

Investing in the stock market is a risky business, but the real risk is not knowing what you’re invested in. How you identify, mitigate, and manage risk is one of the most important factors when it comes to investing. This is a complicated dance: from the bottom up, stock specific risk needs to be understood, together with broader macro and top-down influences.

It’s as much about identifying the stocks that will outperform as it is identifying the poor quality or unsustainable businesses that could severely affect your returns.

At Pie Funds, we’ve been investing for over 15 years, and we have developed a robust investment process for managing risk, based on 5 key principles. This process is especially important in uncertain economic times, and it helps us to identify areas of risk in our portfolios, reduce those risks where necessary, and helps us build resilient portfolios that can outperform even in challenging times.

These 5 key principles guide our investment choices: Principle one: We love to see skin in the game We invest like it’s our own money, because it is.

Our staff, directors, and shareholders have over $120m invested (as at 30 April 2023) in our funds, which ensures risk management is at the forefront of our capital allocation. We love founder-led companies who share the same values, because they often have extra passion for the company that can give it an edge in the market.

Principle two: Fundamentals We look at a companies fundamentals, and we engage with companies on their approaches and practices. We manage our funds in accordance with a robust risk framework to act in the best interests of our investors.

Principle three: We invest in people When driving returns, it matters who drives. Sure, lots of people can drive, but only a few can race.

We invest in quality businesses with proven management teams, and if the people change, we review our investments and exit if we need to.

It’s that important.

Principle four: We like to see tailwinds The best sailboat is nothing without wind. For long-term wealth creation you need what’s next, so we work to find emerging leaders and get in early for the journey up. We’re interested in where the world is going, and the wind in your sails will take you a lot further.

Principle five: Set something aside for a rainy day Make hay while the sun doesn’t shine. Much like you, we have something tucked away for a rainy day. We are long-term thinkers and are ready to act when we see threat or opportunity. We hold cash and use market hedging when appropriate.

As active management specialists, we stick to these principles when markets are up and when they’re down, too. Our investment team is always thinking about how the funds can adapt to the current environment and how we can generate long-term outperformance. We’re not fearful of risks; we endeavour to understand, manage, and minimise them. Our core investment objective, which has not changed since the company launched, is to find high-quality growth companies with strong balance sheets and great management teams.

*Mike Taylor is the CIO and Founder of Pie Funds. You can view our disclosure documents on the Pie Funds website. For personalised financial advice, please speak to a financial adviser.

‘We invest like it’s our own money, because it is.’

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INSIGHTS

Spending Greener Without Breaking the Bank Buying less, shopping local and being smart about energy use are just some of the ways you can help.

Most of us want to spend ethically and responsibly – but with the price of food up 12 per cent in a year, it’s not always affordable to shop the way you’d like to.

Here are seven tips for making your spending greener without breaking the bank.

1. Buy less, maximise what you already own It’s cheap and it’s green: just don’t buy as much stuff. Wear your old clothes in new ways; get your appliances repaired instead of replacing them; and reduce the amount of food you throw out each week. Seems obvious, but it can make a big difference to your savings account and your carbon footprint.

2. Shop local There’s no beating the prices you’ll see advertised by Temu, Shein or Wish, but these brands get low ratings in sustainability and ethical evaluations.

Working conditions in Chinese manufacturing are often unsatisfactory, and products are regularly made with single-use plastic and typically wrapped in it. Returns often end up in landfill, too.

When you shop locally, you’re supporting Kiwi-based businesses so profits remain on-shore. The carbon footprint of locallysourced items is usually much lower than those made overseas, and you’re helping create jobs in your community. From a selfish perspective, there’s also an extra potential benefit for homeowners. One British study found house prices rose 17 per cent more when town centres had plenty of prosperous independent stores.

If you’re on a tight budget try buying local second-hand goods instead of new – Trade Me, second-hand stores and local online communities are all excellent sources of well-priced products. You can give something a second life and keep it out of landfill.

3. Choose an ethical KiwiSaver fund It’s rare for Kiwi companies to be publicly called out for greenwashing, but our investment funds are one unfortunate exception. According to Mindful Money, a charity that promotes ethical investment, in 2021 several funds that claim to be ethical were invested in companies aligned with Vladimir Putin’s regime. And New Zealand had $15 million invested in nuclear weapons.

Mindful Money has an online tool that shows how much your fund has in potentially problematic investments, and it’s well worth checking out how what lessthan-lilywhite companies your KiwiSaver might be invested in. Not happy with the results? You can choose a new fund by selecting areas of concern to rule out.

4. Go paperless Bank statements, investment statements, electricity bills, rates notices – if they’re still arriving in your letterbox it’s time to make the switch. Nearly every big business offers the option of replacing physical paper work with electronic notifications. You’ll be saving on paper, ink, and the little plastic window on the envelope. You’ll also save yourself at least an hour a year previously spent opening them up, glancing at them, then throwing them away.

5. Reduce energy consumption – or shift it off-peak This is a great way to save money and help the environment at the same time. Use timers to switch off appliances so they’re not constantly on standby; take shorter showers and use your clothesline when you can.

Even if you don’t cut back your power at all, by using less during peak times (7-8am and 6-7pm) you’ll also help cut carbon emissions. During peak hours, particularly in winter, we have to turn on the most environmentally expensive types of generation to meet demand. This means using fewer renewables and more fossil fuels like coal and diesel.

6. Switch up your coffee cup If you buy a coffee each weekday you’re producing about 14kg of waste each year, and most types of disposable coffee cups can’t be recycled, according to the Sustainable Business Network. You could switch to a reusable cup, which is a great choice provided you use it for at least a year.

Alternatively, look for a coffee shop that provides compostable cups or those made from 100 per cent renewable resources, which cause less environmental harm than traditional plastic-lined paper cups.

7. Sell or donate second-hand goods Don’t just send old items to landfill. Sell what you can for a quick bit of extra spending money, or donate anything in good condition to be sold by your local charity shop. Either way, you’re cutting back on waste and giving someone else a chance to get a cheap item.

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PERSONAL FINANCE

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INSIGHTS

Pushing the Risk Envelope As a nation we take a fairly conservative approach to investment, but our aversion to risk could be costing us, writes Ben Tutty.

Risk is a scary word. It brings to mind stock market crashes, diving investments and life savings slipping through your hands.

Kiwis obviously have the same ideas because as a nation we take a fairly conservative approach: only around a quarter of women and a third of men describe themselves as aggressive or growth investors, according to Financial Services Council surveys.

We’ve also poured $1.5 trillion into housing because it’s seen as a safe haven.

However, our aversion to risk could be costing us. In the words of Mark Zuckerburg, and any financial adviser worth their salt, “The biggest risk is to take no risk at all."

Why we need risk Darcy Ungaro, CEO and adviser at Ungaro & Co, one of New Zealand’s leading boutique financial advisory firms, explains that risk is an essential ingredient for all investments.

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F E AT U R E S

“It’s simple. The reason we get a return is risk. It’s a scary word though, so it helps to re-frame it as volatility, and we shouldn’t be scared of volatility.”

Higher risk investments are typically those with higher volatility, meaning they change in value rapidly (up or down). Lower risk investments, like defensive funds, experience slower value changes, meaning they have less volatility.

Dean Anderson, CEO of Kernel, the country’s fastest growing investment fund manager, says Kiwis misunderstand risk.

“When people think of risk they think their WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 4 0

KiwiSaver is going to go to zero. That’s not going to happen. A well-diversified KiwiSaver fund or index investment may go up and down in the short run, but it’ll generally trend up over time.”

In other words, riskier or more volatile investments may go up and down faster, but they will also often have more potential for long-term growth.

All about horizons Many of us should be taking more risk with our investments. But how do we smooth out the ups and downs caused by volatility to ensure we’re not losing money? With time.

Before you invest, think about how long it will be before you need the money. If it’s seven to 10-plus years you’ve got enough time to take a risk and choose more volatile investments. If it’s five to seven years you’ll want to be more careful. If you’ve got less than three to five years you may not want to invest at all.

Short-term investments If you’re saving up for something and you’ll need the money in the next three years you’re probably best not to bet it all on Dogecoin. Ungaro explains that a conservative approach is best when you don’t have the luxury of time.

INSIGHTS

“Investing may not be worth it if you have less than three to five years. For this time frame I advise a lot of my clients to take out a revolving credit or offset facility on their mortgage and put the money against that.

This gives you a guaranteed return in the form of reduced interest.”

This return could be in the vicinity of 6 to 7 per cent based on mortgage interest rates at the time of writing. Ungaro adds that if you don’t have a mortgage you could consider other options.

“Maybe split between term deposits on a short-term basis. Have 18 months or oneyear term deposits rolling over or use a high

interest savings account. You could even hold a small percentage in physical cash.”

The key thing to remember during this short time frame is that you don’t have enough time to make volatility worth the risk. For that reason you should focus on ways of earning a return from investments that have minimal volatility.

‘Only a quarter of women and a third of men describe themselves as aggressive investors.’

Mid-term investments In the mid-term you’re probably still going to want to take caution and make sure you don’t have all your eggs in one basket. The focus here should be on conservative funds, balanced funds or cash, depending on the flexibility of your goal.

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F E AT U R E S

‘The reason we get a return is risk. It’s a scary word, so it helps to re-frame it as volatility.’

– Darcy Ungaro “The amount of risk you may take in this medium term really comes down to the flexibility of your goals,” says Anderson.

For example, if you’re buying a house in five years but you can delay it by one or two years, then you may be able to afford to take on more volatile investments. That’s because if the stock market dips in the five years before you buy you can always delay the purchase until it’s recovered.

“During the mid-term I’d look at conservative and maybe balanced funds plus cash depending on what your goals are.”

Ungaro recommends a slightly more aggressive approach and says it’s possible to successfully invest in equities and other high-risk asset classes in the mid-term as long as you’re diversified. “If you’ve got more than five years you can start to use diversification to de-risk your investments during that time frame.

“There’s no one rule when it comes to diversification, but I often work on this framework. I’ll have my core investment, 50 to 80 per cent in managed funds or a low-cost index. Then I’ll have 10 to 50 per cent allocated towards buckets which I call satellites.”

This might be 10 per cent in shares in individual companies, 10 per cent might be semantic ETFs (like AI, blockchain, robotics), and 5 to 10 per cent in crypto currency, and 5 to 10 per cent in a commercial property fund, for example.

Long-term investments When you’ve got seven to 10 or more years until you’ll need the money you’ve got time to take a little risk, so sit back and let your money do the hard work for you.

Your investments might include individual shares, growth funds or even aggressive funds (which generally hold all growth assets like equities and very few income assets like cash or bonds).

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INSIGHTS

You could even take a punt on alternative assets like crypto, NFTs and others, but Anderson recommends doing so with care.

“There are known asset classes like cash, shares and bonds that we fully understand and have centuries of data around them.

Then there’s emerging assets like NFTs and crypto. They’re just so unknown, they’re not proven or matured. They may be a game changer, but they could also be nothing and there’s a lot of risk with that.”

Again, even when investing over the long term the key is to diversify and if you’re going to take big risks on unproven

investments it’s usually best to make sure they only make up a small percentage of your portfolio. There’s no hard rule, but 5 per cent could be a good place to start.

The guidelines and principles detailed above should still hold true for most, but Anderson says many will avoid investing completely during this time.

Controlling emotions The S&P 500 dropped 19.4 per cent in 2022, a sign of a wider market slump that’s hitting investors and KiwiSaver balances.

This year economists are agreeing that NZ is most likely in recession already and this is expected to last until 2024.

“The hardest thing right now is that your instincts are telling you don’t invest, it’s too risky. But if we look back to the GFC many of those who had cash flow and invested it consistently put themselves in really good positions to make good returns.

That means investors could be in for more hard times as the markets react to these tightening economic conditions.

“If you can control your emotions and make small but consistent investments, regularly, over a long time it’s possible you could do the same.”

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CMC MARKETS

Riding the Crypto Wave Despite a multi-month jump in Bitcoin and Ethereum, the rally in cryptocurrencies still faces downside risks, writes market analyst Tina Teng.

Bitcoin topped the 30,000 mark in midApril for the first time in 10 months, up more than 80 per cent year-to-date, while the global crypto market cap rose 61 per cent, and the trading volume increased about 231 per cent during the same time frame.

Bitcoin’s dominance is at 46 per cent of the whole market cap currently, according to CoinMarketCap. Not only the largest cryptocurrency, the second most popular digital coin, Ethereum, also topped 2,100 at a nine-month high last month, a few days after the announcement of the “proofof-stake (POS)” update, which is called Shanghai, or Shapella.

The upgraded blockchain enables users who have staked their Ether to validate transactions instead of computer-powering

intense mining. The upgrade is seen as a major step towards reducing fossil fuelgenerated energy consumption.

However, the reason behind the recent broad-based rally in cryptocurrencies is not just impulsive dip-buys.

Macro context plays a major role Bets for a sooner Fed pivot on rate hikes have been dramatically strengthened following the bank turmoil in early March.

Traders see the liquidity conditions improving after a slew of bank rescue packages in the United States and Europe, which boosted a new wave of buying frenzy in cryptocurrencies since midMarch when Bitcoin broke through the key resistance of the 50-day moving average around 25,000, while Ethereum rose above 1,700.

Crypto’s positive correlation with technology stocks is seen in asset class allocations due to the similar nature of volatility. The technology behind cryptocurrencies also connects them with growth stocks in broader markets.

Historically the biggest cryptocurrency, Bitcoin, is a typical risk asset that is mainly driven by the central bank’s policies and liquidity conditions. The bottom of the digital coin is seen when the Fed holds rates.

Fed Funds Rate

Bitcoin

Bitcoin / U.S. Dollar • 1D • BITSTAMP

In fact, Bitcoin and Ethereum bottom-out patterns had surfaced since the beginning of January when tech stocks started to rebound amid cooling inflation in the US. Dip-buys in the risk assets began to merge as investors expected a policy turnaround by central banks.

15000.00% 14000.00% 13000.00% 12000.00% 11000.00% 10000.00% 9000.00%

BTCUSD +6272.35%

8000.00% 7000.00% 6000.00% 5000.00% 4000.00%

FEDFUNDS +5066.67%

3000.00% 2000.00% 1000.00% 0.00% -1000.00%

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2019

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F E AT U R E S

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CMC MARKETS

‘The newly-developing digital world still faces challenges in scams and hacking.’

Downside risks remain Despite a multi-month jump in Bitcoin and Ethereum, the rally in cryptocurrencies still faces downside risks in terms of the central bank’s policy and speculative trading activities.

The price correction could be sharp if risk-off sentiment slashes broad markets again. As the cryptocurrency market is still relatively new, there is no such way to do the traditional valuation like stock markets. Therefore, the market cap of a cryptocurrency can be inflated or deflated by market sentiment. Or in other words, cryptocurrencies can be seen as purely speculated markets, although supply and demand could still be fundamentals that provide trending clues.

The road to crypto adoption Crypto adoption tends to mount when central banks provide more liquidities, such as Tesla’s announcement to accept Bitcoin as payment and EI Salvador’s adoption of Bitcoin as legal tender, which all happened when the interest rates were ultra-low and cryptocurrencies were in a surge.

The speed of crypto utilisation has slowed since the central banks started the aggressive process of tightening their monetary policies.

The severe price fluctuations make it hard for businesses to grow their adoption. Plus, regulatory issues are another roadblock for the mass adoption of crypto payments as cryptocurrencies operate in a legal grey area in many countries, and regulatory changes can have significant impacts on their price.

The newly-developing digital world still faces challenges in scams and hacking. The notorious FTX’s former CEO, Sam Bankman-Fried, caused billions of dollars in losses and was charged with federal fraud. Therefore, while considering investing in cryptocurrencies, it is better to do your own analysis against the macro backdrop and all the above issues that matter.

For breaking news, follow CMC Markets APAC & Canada on Twitter @CMCMarketsAusNZ

This is not investing advice and should be read as general information. Investing in CMC Markets derivative products carries significant risks and is not suitable for all investors. We recommend you seek independent advice and ensure you fully understand the risks involved before trading.

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TA X

Capital Gains a Taxing Question Indeed Whether or not our tax system is fair, there’s little doubt it needs to change.

Unfortunately, a recent IRD report has simply added fuel to the fire, writes Ben Tutty.

New Zealand used to have a reputation as an egalitarian country; a place where everyone gets a fair go. But rising income inequality, house prices and a cost of living crisis have called that reputation into question.

A recent report by the IRD is asking further questions by revealing how much tax (or rather how little) the ultra rich pay. It found that the median effective tax rate of the wealthiest 311 families in New Zealand was 8.9 per cent. That’s less than half the average Kiwi’s effective tax rate (20.2 per cent).

While those numbers are shocking some have claimed they’re based on false assumptions and that the report’s findings are questionable. Others say the report is sound proof that NZ and its tax system is fundamentally unfair. Who’s in the right?

A rather odd picture Robin Oliver, director of private tax advisory firm OliverShaw and former deputy commissioner of policy at IRD, says some calculations in the report aren’t based on hard data.

“Yes the report produces a low effective tax rate [for the 311 families] but it’s not based on actual numbers. The income figure is based on assumptions about notional income from unrealised gains.”

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F E AT U R E S

‘Most of the capital gains in the report were from one year during the Covid asset bubble.’

In other words, the report includes the increasing values of property, businesses and other assets held by the wealthy families as economic income, and it works these values out using models and estimates because the assets haven’t been sold yet.

“That effective tax rate of 8.9 per cent is so low because these unrealised capital gains are included. But it’s a rather odd picture because no-one is suggesting we tax them,” Oliver said. “To my knowledge no country in the world has a comprehensive tax on unrealised capital gains.”

Another problem with the report, according to Oliver, is that it doesn’t take into account inflation and comes to questionable conclusions.

“It doesn’t paint an accurate picture of our tax system. The recent Treasury report is much clearer: it says the higher income you earn the higher tax you pay.”

The objective of our tax system is to raise money to fund government activities and Oliver says it does this very well. “It’s the world gold standard in terms of tax design.

It makes a lot of money and it does so efficiently.”

And, most importantly, it’s easy to understand and makes sense to most people. “The amount people are taxed reflects their ability to pay. It’s also objective; your taxable income is based on hard numbers, not the whims of an official or a valuation of your business or property.”

Problem with unrealised capital gains If we were to tax unrealised capital gains then unrealised capital losses would also have to be allowed as tax deductions in the name of fairness, according to Oliver, and this could raise a few issues.

“Most of the capital gains in the report were from one year during the Covid asset bubble. Half of those gains have reversed so all of a sudden [Grant] Robinson would look at his numbers and see tax revenue has collapsed.”

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The next problem is that if you institute an unrealised capital gains tax, many of the super wealthy may simply choose to leave, which could minimise the gains from such a tax. That’s what happened in Norway when their government increased its wealth tax (which includes realised capital gains) from 1 per cent to 1.1 per cent. In fact, more than 30 Norwegian billionaires and multi-millionaires left in 2022, according to Dagens Næringsliv newspaper. Had they stayed they would have contributed $82 million to government taxes per year.

The report raises thorny issues and it’s got its problems, but the main question it’s asking still remains: is our tax system fair?

Oliver says that’s a subjective, value-based question, but he thinks it is.

“A third of the population pays negative tax, meaning they get more in tax credits and benefits than they pay. What we could do to make it fairer is move the middle

brackets from 17.5 per cent to 39 per cent upward because inflation has meant that more and more people are captured in these higher brackets.

“But the problem is when you move stuff around, there’s holes elsewhere. It’s like whack-a-mole. I’ve got sympathy for Grant Robertson, there’s no one solution and it’s not an easy job.”

Is our tax system really fair?

Shamubeel Eaqub is an economist, author and director at economics consultancy Sense Partners. His assessment is the polar opposite to Oliver’s.

“No, our tax system is not fair. We are not asking the wealthy to pay any tax on the largest source of their income. They are minimising the tax they pay with good accountants, but it’s not their fault, it’s the fault of our spineless tax policy,” he says.

“The report shows very clearly that the

TA X

majority of tax is collected from people who are working. We have a tax system that’s less progressive than Australia. We want Nordic-style welfare and services but with low US-style taxes. New Zealand being egalitarian is just a pretty little lie that we tell ourselves.”

He adds that the calculations in the report are legitimate because unrealised capital gains are economic income and they do increase an individual’s ability to purchase goods and services. Eaqub claims that those who disagree are simply lying.

“There’s a small group of people who understand issues around tax. There’s so much self interest and so many conflicts of interest. Good public policy can’t be designed by people with self interest.

The fox is in the hen house. The question of how these gains should be taxed is a distraction. The central issue is that they should be taxed.”

Running out of money Whether or not our tax system is fair, there’s little doubt that it needs to change.

The fact is, our government has a big problem. The population aged 65-plus is expected to go from 25 per cent to 40 per cent by 2050, causing the cost of superannuation and health care to skyrocket. Treasury estimates that our infrastructure deficit is sitting at $210 billion and climate change is expected to cost a fortune in the future.

These looming costs will demand higher expenditure, but where will the money come from?

Most (including Oliver and Eaqub) agree that squeezing the low and middle income earners for more tax is not a good option.

Oliver argues that increasing economic growth is the way forward because more income equals more government revenue.

Eaqub says capital gains is an obvious place

to start, but he’s not holding his breath.

“We’re a very reactionary country, we make band aid changes but that’s not going to be possible with climate change. The problem is the way we approach public policy is not very sophisticated; there’s very little framing and narrative. There’s never a coherent, strategic vision of how to shape the country, just a laundry list of policies.”

With all that said it’s hard to imagine that significant change will come any time soon, whichever party is in power. But whatever happens Eaqub explains that the two pillars of economic policy should guide any change.

“The two pillars are equity and efficiency, but the equity is lacking. For example, one of our most powerful institutions [the Reserve Bank] doesn’t consider equity or distribution when making decisions. If you can’t do both, you shouldn’t be a regulator.”

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F E AT U R E S

Mitigating Risk in Climate Change Investment in resilient systems is essential for minimising risk in the Pacific Islands.

The notions of investment risk can be viewed differently in Pacific Island nations – and indeed in New Zealand itself.

As we all well know, normally the discussion about investment risk rests on that uncertainty borne by the investor.

But the current effects of climate change take the analysis away from perceived risk to the financier, to the risk mitigated as borne by the people of the recipient islands.

And how, given the reality of climate change, and the knocks to countries from ever more frequent extreme weather events, investments in resilient infrastructure – energy systems, also water and comms supply, transport network, construction methods, etc – we can minimise risk to both the investor and the communities that are the recipients of that investment.

Stated simply, risks to the investor and the recipients can be minimised – if we invest in resilient systems.

Pacific Islands context To put all this in Pacific context, consider for a moment the challenges to New Zealand in recovering from Cyclone Gabrielle, a single category three cyclone that hit us in February 2023. And that Vanuatu first endured Gabrielle, which formed in the seas around that country, then two category four cyclones Judy and Kevin in just one week the very next month.

Suddenly the discussion about mitigating climate change risk to investment and infrastructure takes on different dimensions.

Indeed for years the Pacific Island countries have taken the lead in understanding the risks of climate change; and planning to address the effects of it. When it comes to communicating with large donors – world organisations, European countries or North American governments and the like – the leaders of Pacific Island countries have been clear to them on what they want to achieve.

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Role of investors In the realm of private investors, there are opportunities to invest in many more modest projects for social good outcomes, like the one to put down cost-effective boreholes to provide a reliable water supply to all outlying Vanautu Islands.

In New Zealand, the trade and investment agency Pacific Trade Invest NZ, is working on facilitating investment in resilient systems throughout the Blue Pacific Continent. A catalogue of possible investment projects in the region can be accessed on the PTI website, here https:// pacifictradeinvest.com/en/investmentopportunities/ They range from an entire freehold island in Fiji, to resorts awaiting post-Covid recommissioning, to aquaculture and other tropical agriculture initiatives.

Emily Thomas, head of Investing with Impact at Morgan Stanley writes, “As scientists increasingly warn about the negative impacts a changing climate could have on our global ecosystems, economies and human livelihoods, more investors are thinking about how environmental and social risks tied to climate change could affect their portfolios.

“As someone who creates investment portfolios that aim to have positive social and environmental impact, I’ve seen that investors can play a role in tackling climate change and aiding in the transition to a lower-carbon economy.”

She goes on to list four significant business risks associated with climate change and opportunities for investors. But she adds an upside of opportunity too.

Risk 1. Damage to buildings and operations: Physical damage to buildings, supplies and equipment due to flooding or other extreme weather events. They can disrupt business and supply chains by halting manufacturing or making it impossible for employees to get to work.

The opportunity: She advises, “Consider investing in companies that have products or services that support increased efficiency and resiliency of homes and buildings.

Potential investments include companies that help refit existing buildings or reinforce existing energy infrastructure.”

Risk 2. Stranded assets: As energy demand shifts toward lower-carbon sources, companies face being left with reserves and other “stranded” assets that they cannot use.

The opportunity: Identify companies that are leading in the energy transition. And, investors could also benefit from investing directly in lower-carbon technologies, such as renewable energy, electric vehicles, battery storage, hydrogen power, and carbon-capture utilization and storage.

Risk 3. Reputational risk: Consumers will increasingly avoid companies involved in environmental public relations crises.

The opportunity: This is a natural choice.

Consider companies with leading sustainable corporate practices across various industries.

Risk 4. Pressure on natural resources: For example, a shortage of drinking water or an excessive strain on food supplies can be

PA C I F I C T R A D E I N V E S T

costly to companies. Without adaptation, estimates show that agricultural profits for common crops could fall 31 per cent by 2070 as a result of climate change.

Again the opportunity is an obvious one: Invest only in companies that support natural resource efficiency, resilient infrastructure, food and water security, and sustainable agriculture.

Last year PTINZ facilitated a US$750,000 investment in the design and installation of fossil-fuels-free, and resilient energy supply systems to the island nation of Niue.

This is to be led by Island Power, a UK-based firm with much experience in this regard.

Marcus Saul, a director of Island Power writes: “Investor risk is a key factor in any project, especially when it comes to renewable energy. Many investors use tools like PESTLE (political, economic, social, technological, legal and environment) to assess the potential returns and challenges of a project. However, these tools may not capture the specific needs and realities of island energy users, who often face different problems than mainland customers and are exposed to different risk than that of investors.”

This situation, as Saul notes, illustrates the “energy trilemma”: the difficulty of balancing energy security, affordability and sustainability under the current debt-based development finance model.

For developers, the focus is often the “least financial cost” of a project as a means of realising greater short-term returns, whilst offsetting a majority of the risk onto the end user.

Island Power, proposes a different model: “natural grids” which are based on energy as a service (EaaS) model. EaaS is a prepaid energy production model that uses new technology and smart contracts to deliver resilient and affordable energy for islands.

At the core of this is the energy trilemma: that energy security, affordability and renewable considerations cannot be squared under the existing debt development finance model.

This can benefit both investors and islanders by creating a win-win situation: “Investors can achieve higher returns by reducing their operational costs and risks, while islanders can enjoy lower energy prices and improved reliability and sustainability. EaaS can also foster economic development and social inclusion by empowering islanders to own and control their own energy systems.”

It is planned that resilient natural grids will become a mainstream model for island energy solutions in the future.

This perspective on just one aspect of resilient investment – here in the case of energy supply – reiterates the dual nature of the challenges and opportunities.

All of which points to the need for new visions of investment in the Pacific. Those based on a balance between perceived investor risk (in financial terms), mitigating climate change disruption, and benefits to island communities (in societal, heritage, and environmental terms).

Put simply, investment risk in the Pacific, and in the context of limiting change, needs to be looked at from both directions.

www.island-power.net www.morganstanley.com/articles/risksand-opportunities-of-climate-change

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F E AT U R E S

Doing Crypto the Kiwi Way Joanna Mathers meets a brother and sister team who saw a quicker and easier way for the digital world to function and had the courage to run with it.

Easy Crypto is an exemplar of Kiwi ingenuity. Created by brother and sister duo Janine and Alan Grainger, it emerged in response to barriers prohibiting New Zealanders from accessing digital assets.

It was crafted from the ground up, with Google as a guide.

Janine Grainger had her crypto epiphany circa 2014. She started reading about Bitcoin and crypto in general: in a globally connected village, a decentralised worldwide digital currency made a lot of sense.

“I became an overnight expert on blockchain,” she laughs.

By 2017, when she was working at Westpac, she became the inhouse expert (by default): sharing her emerging knowledge with teams.

In these early days purchasing crypto in NZ wasn’t easy; it was a kind of virtual cottage industry, mates trading with mates in a tiny pool.

But if you weren’t in the know, trading was a rigmarole. There were few NZbased platforms, and the price was inflated: “There was about a 15 per cent price difference buying in New Zealand compared to overseas. It seemed really unfair.”

Coding experience Her brother Alan felt the same. He had more tech experience than Janine, working in IT, but had no coding experience. He saw the potential for an exchange that allowed Kiwis to trade without the headaches and, in 2017, started to create one. Researching WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 5 4

the appropriate coding language on Google, he followed his sister’s lead and became an overnight expert.

“He had no idea how to create an exchange,” says Janine. But in less than a week Easy Crypto was up and running.

And then it was over to Janine to operationalise.

After the soft launch in late 2017, the site was taken offline while Janine ensured it was meeting all the regulatory criteria for a financial service. There was, and still is a misconception, Janine says, around the regulation of crypto: “The idea that crypto trading is unregulated is just not true.

“Any crypto exchange in New Zealand is regulated, in a general sense, by a number of acts,” she says. “Crypto exchanges are considered financial services providers and are covered by rules around that. They need to adhere to the rules of the Anti-Money Laundering and Countering Financing of Terrorism Act (AMLCFT). And there’s the FMA Act, and the fair-trading standards, that need to be adhered to.”

Janine ensured the boxes were ticked and that Easy Crypto adhered to all the appropriate regulations before relaunching in early 2018.

Search, check out, pay Easy Crypto instantly differentiated itself from the competition. The traditional model of a crypto exchange is clunky: funds are sent to the exchange to facilitate a trade, assets are purchased, and if a sale takes place withdrawals need to be made from the online “wallet”. The process can take days.

Easy Crypto has a different model, acting more like online shopping: search for a product, check out, and pay. And this happens in seconds.

While the model is simple, setting it up as a business was not. They were unable to get insurance; they struggled to find a bank (they are are now the only banked crypto exchange in New Zealand) and they weren’t allowed to advertise on places like Google or Facebook because they had “no-crypto” policies.

But even at this early stage, there were plenty of Kiwis hungry for crypto. And they liked what Easy Crypto offered: through word-of-mouth alone, the company recorded $200 million-plus in sales by 2020.

Then Covid happened.

What could have been a catastrophe ended up a boom for Easy Crypto and crypto

E A SY C RYP TO

assets in general. People were forced to work from home, and connecting online became common. Zoom took the place of work meetings and the world went virtual.

This familiarity with digital meant people were more comfortable with crypto as a concept.

As Janine explains, 2020-2021 were massive years for Easy Crypto. The success reflected the explosion internationally: between March 2020 and October 2021, Bitcoin rose in value from just over US$6,000 to US$61,800, but it wasn’t going to last.

‘Crypto winter’ Crypto is volatile: the “crypto winter” of 2022 saw prices plummet. Triggered by the United States inflation surge, and the sell-off of risk assets by spooked investors, crypto currencies LUNA and TerraNova collapsed, Bitcoin dropped by nearly 70 per

cent, and then FTX happened.

For Janine, FTX’s collapse was “really disappointing”, but she doesn’t view the scam as related to crypto. Instead, she views it as a Bernie Madoff-style Ponzi scheme, motivated by greed and hubris.

“But it gives the industry a bad name,” says Janine. Easy Crypto had no exposure to FTX, but they did notice a spike in trading when the collapse happened.

Janine says crypto is emerging from the hibernation brought on by the crypto winter and the collapse of more mainstream financial services, showing investors that there’s risk everywhere.

“The collapse of the Silicon Valley Bank, for example, was actually really good for crypto.”

Staff of 50 The company now has an international

presence and a staff of 50 (most in NZ).

Easy Crypto has been used to facilitate over $2 billion in trades, and 250,000 Kiwis are registered on the site.

Janine believes finance will become 100 per cent digital in due course, and that the use of crypto as currency in real-world transactions is only a matter of time.

“People are currently trading for speculation, instead of real-world use,” she says. “But we just need some bridges to be built in order for this to change.”

Long term, the true potential of crypto will be revealed as assets and financial services become digitised.

Interestingly, statistics reveal that 40 per cent of millennials have crypto assets.

They are, perhaps, paving the way for a new future: one in which the real potential of this esoteric asset class is realised.

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F E AT U R E S

Are we Too Quick to Crown Cash the Next King?

Emotionally, allocating all your assets to cash might feel right, yet strategically and tactically it’s not quite so straightforward, writes Ralph Stewart.

Over the 20 or so months between early 2020 and late 2021, capital markets were in party mode. Share prices soared on upbeat outlooks and ready access to cheap credit.

Fixed-income assets were largely confined to the sidelines, struggling to rustle up a dance partner, or even a shy glance from across the room.

Meanwhile, as interest rates hovered near the floor (or in some cases, below it), cash wasn’t invited at all.

Not so now. Inflation swept in like the ultimate party pooper, giving global central banks an epic hangover and a prescription for successive, painful-but-for-your-owngood interest rate hikes.

Against this backdrop, cash has ascended the throne. In the United States, professional investors are piling into money markets at an eye-watering rate – US$588 billion since the beginning of March – seeing money market assets balloon to an all-time high of around US$5.3 trillion, according to recent data from the Bank of America.

Defensive holding pattern From a tactical asset allocation perspective, there’s a case for increasing short-term exposure to cash right now. With an attractive risk-adjusted return, it represents a defensive holding pattern in uncertain times.

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as close to 7.5 per cent as possible. As benchmark volatility rises, so does our effective cash position.

Yet it’s not the whole story. Over the longterm, fixed income and growth assets remain crucial to a strategy designed to generate a stable, reliable income over a couple of decades or more.

The Financial Services Council (FSC) recently released its 2023 Financial Resilience Index, finding, among other things, that many lack confidence “in selecting investments and planning for retirement and although the majority haven’t thought about how much they will need in retirement, those that have vary wildly in their assessments about what they may need to retire with dignity”.

Retail investors rarely think tactically about their own money. Rather, they’re inclined to be driven by emotional asset allocation. And when financial markets feel directionless or,

worse, that direction is down, emotions run high.

Primary instincts More so if you’re in the 60-plus age bracket when your primary instinct is probably to safeguard your nest egg. In that scenario, who wouldn’t be tempted by five-year term deposit rates of up to 5.5 per cent, or more if you’re comfortable with the higher risk of non-bank deposit takers?

Emotionally, allocating all your assets to cash might feel right. Yet strategically and tactically it’s not quite so straightforward.

For starters, it runs counter to the number one rule in the investment playbook – diversification.

Equally important, retirement isn’t about safeguarding the nest egg you’ve spent years working hard to accumulate. It’s when you put that money to work to create an income that allows you to thrive in your post-work years. For most people retirement

LIFETIME RETIREMENT INCOME

will be counted in more than years, it’ll be decades. That’s the definition of a longterm investment horizon. And it requires a calculated strategy that powers up your savings to support you for the rest of your life.

say you put your assets in a two-year term deposit paying 5.2 per cent. Less tax of 17.5 per cent and accounting for the current inflation rate of 6.75 per cent, you’re left with a return of -2.45 per cent per year in real terms.

Tactical allocations to cash over and above a portfolio’s “normal” position are generally accompanied by an eagle eye on economic and market indicators so those assets can be redeployed as soon as conditions improve and/or attractive opportunities arise.

Consider that one of the biggest expenses in retirement (food) saw prices rise 12.5 per cent in April compared with a year ago, according to Stats NZ’s most recent data, and the picture is even less compelling.

Those hefty-looking returns aren’t even close to keeping pace with the cost of living.

When the clouds lift Emotional allocations to cash are rarely as dynamic. That can mean missing out when economic clouds lift and the green shoots of commerce sprout anew – which will happen. At least, it’s happened after every recession and every market sell-off so far.

At the FSC webinar launching its resiliency index, ANZ Chief Economist Sharon Zollner noted that while cost of living pressures have dented domestic consumer confidence, they haven’t yet weighed on spending. She attributed this to the socalled “misery index”, which is simply the unemployment rate plus inflation. In the current tight labour market people feel

King cash isn’t the wholly beneficent ruler it might look like at first glance, either. Let’s

secure in their jobs, meaning the misery index isn’t as miserable as it could be.

Runaway inflation However, this doesn’t quite play out the same way if you’re retired, as you no longer have a secure, steady salary to offset the impact of runaway inflation unless you’ve structured your savings to pick up the income slack.

Tying up assets in a term deposit might feel right, right now. After all, cash is king; it’s the belle of the ball. But every decision, whether money-related or otherwise, has an opportunity cost. Choose one thing, forego another. Committing all or most of your assets to a term deposit means giving up access to it for a defined period.

In retirement, this means you’re unlikely to be reaping the maximum benefit from your savings by giving up the opportunity for a steady income and the choice and comfort that could provide.

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INSURANCE

She’ll be Right …with Insurance We tend to think everything will be OK, but has a global pandemic, looming recession and a deadly cyclone finally started changing our attitude?

Clarissa Hirst investigates.

New Zealanders are typically more inclined to safeguard phones and cars than health, incomes or even lives.

However, things are starting to change.

Pandemics, cost of living crises and cyclones are – sometimes quite literally – the rainy days that prompt us to think about how we protect ourselves when things go wrong.

The upside is that now more of us are thinking and having conversations about how we manage risk, a sign of positive change in this time of economic uncertainty.

In 2019, the Financial Services Council (FSC) released Risking Everything, a piece of research that looked into New Zealanders’ attitudes to financial risk. Those surveyed were aware of various risks out there, like global risks, natural disasters, loss of income/ increase in expenses, illness and death.

‘We might need a plan B’ However, one in three of those who identified these risks didn’t tend to think about how these risks might affect them.

In May, the FSC’s annual tracking survey, the Financial Resilience Index, released fresh data that shows Kiwis may be changing their attitude from “she’ll be right” to “we might need a plan B”.

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F E AT U R E S

‘Concerns around redundancy have made people enquire about cover.’

Research shows attitudes to managing risk are changing, with levels of insurance up from 2022 and many people thinking more about their financial situations.

Silver lining, stormy weather The deadly flooding events in the first quarter of this year have been one factor in these changing attitudes. Just over three quarters of respondents to the FSC survey said these weather events had affected how they thought about protecting themselves and their families.

•

32 per cent of respondents had thought about it but not yet taken action

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16 per cent were actively reviewing their financial situation

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29 per cent had spoken about their financial situation with their family.

This shows there’s been a definite change in attitudes and behaviour. If there’s a silver lining to the horror show that’s been 2020 onwards, it’s that finally we’re starting to have those important conversations and prepare for when the worst happens.

More seek advice We’re not just thinking about our situation and talking about it with our families; we’re also taking steps to get professional advice.

Financial adviser Elle Wuthrich has noticed an uptake in enquiries and insurance applications recently. “Covid-19 and the changes to the economy have opened up the minds of lots of people to seek advice and protect their health and livelihoods,” she says. “The largest uptake is medical insurance.

“I’m not just seeing individuals sign up, I’m signing up entire families. [They] see the benefits of being fast-tracked so they can receive care quickly and get back to doing what they love.

“Concerns around redundancy have made people enquire about cover and I have had to educate them about how the insurance product works and also how they can selfinsure.”

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shows an uptick of reported levels of health insurance (5 per cent) and income protection insurance (9 per cent) since 2022.

If the recent weather events, the pandemic, and the economy (or all three) have caused you to think more about your approach to risk, here are a few tips:

The balancing act The main reason Kiwis don’t take out insurance is because they see it as being too expensive (Money and You: Taking Cover, 2022).

1. Turn that thinking into action: Talk to someone you trust about how they protect themselves and their whānau.

Taking out insurance is always a balancing act between forking out money now for long-term peace of mind versus not taking out any cover and being prepared to take a serious financial hit should the worst happen.

It seems that for many of us the past few years have been a real shake-up and harsh realisation that life throws us curve balls from time to time. We’re starting to take less risks when it comes to our incomes, lives and health. We’re having more conversations about risk, reviewing our financial situations, and getting advice from experts on how best to protect ourselves.

2. Seek advice from an expert: A financial adviser or insurance broker can help you navigate the options and determine the best fit for your personal situation.

3. Review your situation regularly: Our attitudes to risk change throughout our lives, so it’s not a once and done exercise. If you’re renting and have no kids you may only have yourself to think about. But if you own a house, start a family, or get married, your approach to risk may change as there’s more at stake.

Take stock of your situation regularly and assess whether you need to make changes.

What happens to your dependents, depends on you.

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M A R K E T U P D AT E

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WORLD VIEW

Who’s Scared of the Next Banking Crisis?

Investors in financial markets were shaken in March by the collapse of several large banks in the United States and Switzerland. Andrew Kenningham considers if this may be the start of a new global financial crisis.

It’s not surprising that the collapse of several banks in the US and Credit Suisse in Switzerland has raised fears of a repeat of the global financial crisis (GFC). After all, that crisis began with a few medium-sized banks getting into trouble. And although that was 15 years ago, it’s still fresh in our collective memory.

Watch the speed While there are similarities with the GFC, the problems in March introduced some worrying new elements. One is the speed at which deposits fled, reflecting the prevalence of internet banking and the role of social media. Customers of Silicon Valley Bank withdrew $42 billion in a single day, whereas the previous largest bank run came in 2008, when customers withdrew $16.7 billion from Washington Mutual Bank over 10 days.

Another is that the regulations set up after the last crisis didn’t work. It turned out that some large US banks were not subject to the toughest health checks established back then partly because the CEOs of several banks, including Silicon Valley Bank, had successfully lobbied to be exempt. And some of the banks which failed in March had actually passed

the financial health checks only a few weeks earlier.

But how bad might this year’s problems become? There are several big differences between the situation now and 15 years ago which provide some reassurance.

Risk awareness For a start, there are no significant losses on the banks’ loan portfolios this time round. In contrast, back in 2008 the underlying problem was that millions of Americans had taken out loans to buy properties only to find they could not afford to service them.

Another major problem in 2008 was that these loans had been distributed around the financial sector in ways which were ridiculously complicated and opaque. Nobody knew where the losses were and that created a climate of fear in which banks refused to lend to one another. This time there doesn’t seem to be such large, hidden losses.

And third, the regulators are now far more aware of the risks. The US moved quickly to guarantee the deposits of its failing banks and Switzerland forced a takeover of Credit Suisse by its long-time rival, UBS. This nipped any contagion in the bud.

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M A R K E T U P D AT E

‘Economists worry about the risks with commercial property loans.’

So a repeat of the extreme events of 2008/09 seems highly unlikely. However, even a less-severe banking crisis could cause problems.

Crises with a history Ever since modern banking was invented there have been bank failures, bank runs and banking crises, but their implications for the wider economy have varied.

At one end of the spectrum the collapse of Britain’s biggest investment bank, Barings, in 1995 had no wider economic ramifications. (It had big implications for Nick Leeson, the rogue trader who caused WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 6 4

the collapse, as he spent four years in prison.) At the other end of the spectrum is the global crisis of the early 1930s that contributed to the Great Depression in the US and is arguably one of the factors which created a fertile environment for fascism in Europe.

The most relevant historical cases today are probably in between these extremes.

One example is the savings and loans (S&L) crisis in the US in the 1980s when thousands of relatively small US banks made losses on their mortgage loans and about a third of them ended up going bankrupt.

The problems in the 1980s were partly caused by the Fed raising interest rates as this forced the S&Ls to raise deposit rates in order to discourage people from moving their money elsewhere.

The S&L crisis ended up being very expensive for the US. But it was a slow-

burning problem which did not prevent the US (and global) economies from performing quite well overall.

Who’s swimming naked?

Nobody knows how this year’s problems will pan out. More problems may yet emerge, particularly if the world economy heads into recession as a result of higher interest rates. As the legendary investor Warren Buffett put it, it’s only when the tide goes out you discover who’s been swimming naked.

Economists worry about the risks with commercial property loans given there is so much empty office space with people still working from home. And in Europe there is a risk of trouble in the government debt market.

But for now it seems more likely that any banking problems will be limited to specific institutions and will not morph into a sustained or systemic banking crisis.

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M A R K E T U P D AT E

Snapshot: Innovations Innovations, news and events from around the world that grabbed our attention and are likely to impact the global economy going forward.

RUSSIA

With Russia seizing assets from Western firms that have left Russia, Alexander Bastrykin, head of the investigative committee of the federal crime agency, is now suggesting that sectors of the economy should be returned to state ownership.

This is to gain security as the war on Ukraine lurches on.

UK

In the United Kingdom, food prices will remain high for longer than expected as the Bank of England raises interest rates yet again. This is the 12th rise in a row. Interest rates have been moved from 4.25 per cent to 4.5 per cent.

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BRAZIL

A London-listed company has been mining gold in the Amazon rainforest without approval from the Brazilian land agency or the consent of nearby indigenous communities, according to The Guardian. The company, Serabi Gold, has been creating large tunnels and trucking ore from the Coringa project site in Pará state. Guardian interviews with land agency officials indicate the land was allegedly occupied by illegal land-grabbers.

CHINA

China’s provincial and local governments are in trouble, with many local authorities deeply in debt. Although growth at national level has been better than expected, the country’s recovery post-Covid is being challenged by more localised issues.

Correct at May 10, 2023.

SNAPSHOT

UKRAINE

Reuters reports Ukraine has received $16.7 billion in financial aid from Western partners so far this year, says Finance Minister Serhiy Marchenko. And according to ministry reports, Ukraine has assurances from partners regarding further support in financing the state budget deficit in 2023.

CANADA

A Chinese ban on Canadian beef, expected to be short-lived, remains in place 17 months later, and it’s unclear why. The ban started after a variant case of mad cow disease was found in a processing plant, but China has not resumed trade. China is Canada’s third-largest beef market, so this is significant.

EUROPE

EGYPT

DW.com reports the Czech currency, the koruna, rose to a 14-year high in June. The Hungarian forint also set a 10-month record earlier this year. This has been boosted by high interest rates, falling energy prices and a strong euro.

Africa is launching into the space race, with support from China. A Chinese-backed space port planned in Djibouti has been touted as a game changer, and in January the African Union inaugurated the African Space Agency based in Cairo.

According to a report from the Africanews website, the space industry is expected to top $22 billion by 2026.

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VERO INSURANCE

Spotlight on the Insurance Industry Sacha Cowlrick, explains how insurance works and how it’s impacted by local and global events.

As the North Island’s recovery from two major weather events continues, a lot of attention is turning to insurance companies, what the role of the insurance sector is and whether insurance is going to be available and affordable for New Zealanders in generations to come.

Understanding the way insurance works is important as it plays a vital role in the financial security of almost all New Zealanders. More than 1 million Kiwis insure more than $100b worth of assets through Suncorp brands, and rely on the security their insurance provides. When the insurance sector is well-structured, well-functioning and financially strong, our business and community ecosystems can function effectively; without it NZ INC comes to a grinding halt.

Sacha Cowlrick is the Executive General Manager, Business, at Vero Insurance. She says insurance is highly impacted by both local and global events and that reinsurance, inflation and climate change play a significant role in insurance offerings.

Vero insurance policies essentially offer financial protection against certain risks in exchange for a premium (the price the customer pays for the protection). These risks can include things like unexpected loss or damage to assets such as your home, contents or motor vehicle, loss of income, or liability for damages to other people or their property. Ultimately, the goal of insurance cover is to improve the financial resiliency of our customers.

“We take the premiums we collect and put it into the investment market to drive a return.

We’re risk conscious and need to ensure the money is available to pay when a customer claims under their insurance policy. Because of this, we put the majority of premiums into

high quality, fixed interest type securities, which means they are very low risk. We also hold equities, and don’t invest in sensitive sectors such as tobacco companies, or any organisation without a 2050 net zero plan.

“We need to ensure we’re investing premiums in companies with the right investment profile to progress us towards our net zero transition goals, and that align with our values as a business.

“This is also important to our reinsurers, as they are interested in our ability to be there to provide insurance to our customers in 10 years, in 15 years and in 20 years’ time.

“We couldn’t do this without the support of our reinsurers, who we transfer risk to at a cost, to protect our own balance sheet.

Maintaining the trust of our reinsurers is essential to the sustainability of insurance in New Zealand.”

Suncorp New Zealand has paid out an average of $800m to customers each year.

In years with significant catastrophe, Cowlrick says this figure is larger. The Canterbury event resulted in more than $5.5bn of claims payouts, Kaikoura around $800m and from the 2023 events payouts may reach $1bn. Collectively this means over the past 8 years, the business has put $15bn back into the New Zealand economy.

Cowlrick says it’s key to understand that

reinsurance operates in a global market.

She says, inflation is driving a lot of the costs as are an increasing number of events occurring all over the world.

“We’re seeing increased intensity of events here in New Zealand but overseas they’re also responding to increasing frequency and severity of events related to weather, such as hail in Europe and floods in Australia.

This is all driving increases in reinsurance and claims costs which are reflected in increases in customer premiums.”

She says Vero’s reinsurers are really interested in New Zealand’s efforts to better understand these secondary perils, such as flooding and storms, and Vero is actively working with central and local government, businesses and banks to better understand these risks and how they are effectively managed.

“We’re encouraging ourselves and local and central government to think differently about how we build, where we build, what mitigants might be available and leaning into the conversations around managed retreat.

“We’re doing this with awareness that the choices we make today about how we manage risk, including climate risk, will ensure the sustainability and longevity of affordable insurance cover for the next generation, and the future sustainability of New Zealand.

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PERSONAL FINANCE

Can KiwiSaver Calm the Recession?

KiwiSaver has several unique characteristics that make it investment gold and a GDP booster, writes Sam Stubbs, of Simplicity.

In reading the dire predictions for our economy, one thing seems to be overlooked - the impact of KiwiSaver. I don’t blame the economists for this; they are paid to predict the next quarter, not the next 20 years. And they tend to think of KiwiSaver money as just another pool of investment savings.

But it’s not. Every dollar of KiwiSaver savings invested in our economy is more impactful on GDP and jobs than almost any other. Why? KiwiSaver has several unique characteristics that make it investment gold, and a GDP booster.

The first is its sheer size. Now over $91 billion, KiwiSaver is expected to be over $200 billion by 2030. That’s $200,000 million, the largest pool of domestic savings New Zealand has ever seen. And KiwiSaver’s growth provides an average additional investment of 2.3 per cent of GDP every year. To understand what money of that scale does to an economy look at Australia. Its $3 trillion of retirement savings has shielded it from recession for the last 26 years.

To see how special KiwiSaver money is, let’s take the example of funding a big construction project. In New Zealand, we have traditionally built buildings with a lot of debt. So, when interest rates rise or resale values drop, the lenders can foreclose mid-project, or the developer may start to default on debt or contractor payments.

The net result is building projects stop mid-stream, and subcontractors find themselves suddenly unpaid and/or out of work. That exacerbates unemployment and the recession and we are seeing that happen right now.

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Building projects An alternative is KiwiSaver-funded building projects. Because KiwiSaverfunded projects will traditionally have less debt (and because funds continue to consistently grow with ongoing contributions), the cash flows are more certain. So the construction project carries on, and everyone keeps their job. This is just starting to happen in NZ, with the first KiwiSaver funded build-to-rent project opening in April.

And the evidence of pension-funded prosperity is compelling. Just look across the ditch. Australia is a commodity economy, meaning its GDP should rise and fall with the price of iron ore and coal. But until Covid, Australia was recession-free for 26 years. Why? A huge contributor was

the consistency and scale of its investment in the local economy, via its ever-growing pension funds.

In NZ, the same will happen. The sheer scale of KiwiSaver savings will allow it to be applied to infrastructure investments previously too expensive to contemplate, and ones that will carry on regardless, and thus help mute any recessions.

The second reason KiwiSaver money is special for growth and productivity is its longevity. KiwiSaver savings are locked up, in many cases for over 40 years. That allows fund managers to invest it long term. It’s the reason four large KiwiSaver managers are already investing in local venture capital and private equity. And this is just the start; it’s good for start-ups and small/ medium businesses wanting to expand.

SIMPLICITY

‘It will slowly transform NZ from a capital-poor to a capital-rich economy.’

The third reason KiwiSaver is investment gold is its consistency. Foreign investment can be a trend-driven tidal wave of capital, causing damage and distortion when it comes and goes. But KiwiSaver is like a slowly rising tide of savings. It’s hard to spot its impacts year by year, but it lifts all boats (that are fit to float) over time.

‘In the hood’ The fourth reason KiwiSaver is special is it’s 100 per cent Kiwi. That removes the problem of offshore investors in sensitive industries. It’s also likely to be more attractive to government, iwi and councils for co-investment. After all, it’s just locals investing “in the hood”.

The fifth reason KiwiSaver is special is how suited it is for investing in building, owning and renting homes. If anything is going to help solve our housing crisis, it’s KiwiSaver.

Why? Because 42 per cent of OECD citizens live in medium and high-density apartments, with many of them owned by pension funds. It’s not uncommon for large pension funds overseas to have five to 10

per cent of their investments in rental housing. KiwiSaver funds can also become large mortgage lenders, competing with the banks and pushing down rates.

And the final reason is how KiwiSaver can be a serious competitor to banks as commercial lenders. They can lend directly to businesses, providing an alternative to banks. KiwiSaver funds cannot take term deposits without being a bank, but they can lend to whoever they like. And why wouldn’t they?

The bottom line is KiwiSaver money is special. It will slowly transform NZ from a capital-poor to a capital-rich economy, just as it has in Australia, Europe and America.

It will be invested for the long-term, and it will be our money. And it will fund many start-up and SME companies, directly or indirectly.

It won’t happen quickly, but it will happen. And it might just help dampen this impending recession. Our economic future is rosier than many think.

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Check out our new fund range, including two new KiwiSaver Funds at simplicity.kiwi Simplicity NZ Ltd is the issuer of the Simplicity KiwiSaver Scheme & Investment Funds. For Product Disclosure Statements please visit our website simplicity.kiwi. For more on fees go to simplicity.kiwi/fees.

PERSONAL FINANCE

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O P E S PA R T N E R S

Higher Risk; Higher Return The secret sauce to investment isn’t property, it’s leverage and calculated risk, writes Ed McKnight.

If the bank lent you money to buy watermelons, and watermelons increased in value, Opes Partners might have built a business investing in tropical fruit instead of property.

Hear me out. If you’re trying to sort out your retirement ahead of time, saving will not be enough on its own. Instead, the real solution is to buy assets you can leverage, and you need assets that tend to increase in value.

What do you want for your future?

When asked the question: “What do you want your future to look like?” most Kiwis don’t want the most expensive house. Neither do they want a Ferrari, or a private jet.

What they do want is a new, reliable car every few years; provide for their families and live a comfortable retirement, mortgage-free.

Don’t get me wrong, wanting high-end luxuries is not a bad thing. If that sort of lifestyle motivates you, go for it. We love the ambition. But most “regular” Kiwis are motivated by something else … they want a comfortable retirement.

achieve financial freedom, but it’s simply not enough. According to Massey University research, if a Kiwi couple (both aged 45) want to retire in 20 years and live a comfortable retirement, they’ll need to hit 65 with a nest egg of $1.2 million.

This is also assuming they’ll own their own home without a mortgage and will receive New Zealand Superannuation from the age of 65.

So, how could you build up that $1.2 million over the next 20 years? Even if you put $100 under your mattress every week for the next 20 years, you would have only $104,000 in cash.

While that might sound like a lot, it’s just 8.6 per cent of what you need in this scenario (after 20 years of saving). It’s certainly not going to see you and your family retire comfortably. So instead of putting your money to bed (or under it), you can get it to work for you.

Case study: Using property investment Let’s say instead of deciding to save for retirement, you bought a $600,000 investment property (with 100 per cent lending).

Over the years we’ve asked a lot of people this question, and most people do have an idea about how they want their future to look. But most investors also have a “wealth gap”. This is a financial gap between the lifestyle they want in retirement, and what they are currently on track to achieve (financially speaking).

The rent you receive may not cover all the costs of holding that property, so your $100 a week (you were putting under your mattress) goes towards topping up the mortgage after the rent.

The real solution is to build your assets. You need to own more; you need to invest more.

Yes, there are a lot of options available to you, but you do need to choose an investment option. You do need to do something, and it’s going to mean taking on some risks.

After paying off your mortgage (and the real estate agent) you’re estimated to have $912,000 worth of equity, and so have made 8.77-times more money.

Saving isn’t enough Money worries have a lot of us … worried.

Sixty per cent of us think about our money worries while at work.

A lot of Kiwis think saving will help them

In 20 years, with the property going up in value by 5 per cent a year, it is estimated to be worth just under $1.6 million.

So, by investing in this single property, you would have made 76 per cent of the money needed for your comfortable retirement.

(That leaves just under a quarter that can be built through KiwiSaver, shares, another investment property, or some other investment plan.)

Love letter to leverage All of this is possible because of leverage.

You use the bank’s money to buy an expensive asset that you couldn’t otherwise afford. Then, when that asset increases in value you keep the extra generated wealth.

You don’t have to share it with the bank or the tax man.

Again, let’s say that you have $200,000 that you can use to buy a $1 million rental property.

If that house increases in value by 5 per cent in a year, it’s worth $50,000 more. You might say: “That’s not bad, a 5 per cent return on $1 million.' But it isn’t. Remember, you only put in $200,000 to make that additional $50,000.

That’s a 25 per cent return on the money you invested, not 5 per cent.

Sure, it’s not as simple as that. But my point is, property isn’t the secret sauce, it’s leverage. The fact that you can borrow against it, and it tends to go up in value over the long term (15-plus years). That’s the special stuff.

This is why we say, we might have started a tropical fruit business.

Are you taking enough risk?

The key message is if you’re saving for your retirement, this will not be enough on its own. You’ve got to do something else. This could be investing, which will bring a higher return.

And yes, this decision will also come with some risks; things can go wrong, and that’s OK. Nothing in property investment is straightforward. Tenants pay rent late (or not at all); property managers might do a runner with your money; house prices go up and down; laws will change.

But as long as you are prepared and take a long-term approach, you’ll get through it.

And the returns can be life-changing.

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M O N E Y M E N TA L I S T

Bridging the Intention-Action Gap Why do we arrive at a decision and then not action it … is there something wrong with us? No, but there is help and a solution, writes Lynda Moore.

After the pandemic and the lockdowns we hoped life would get back to some sense of normality. Instead, we adjusted to the “new normal” and life carried on.

Then Mother Nature had other thoughts and decided to throw extreme weather at us; the cost of living and mortgage rates shot through the roof; and all the livingyour-life stuff has caused plenty of stress and anxiety. It may have even given rise to questioning your life, where you’re going and what it is that you really want.

Some of us resolved to make change and have done it. After months of thinking about it, weighing the pros and cons, we’ve done it; we’ve changed how we live our life.

That may be a career change, evaluating your business and your role in it. You may have taken advantage of remote working and moved out of “town” and immersed yourself in country life. Maybe you reassessed your relationships and made changes there too.

But others haven’t committed to the intention, yet. Why do we arrive at a decision and then not action it? Is there something wrong with us? No, it’s relatively normal human behaviour. There’s even a name for it; behavioural scientists/ psychologists call it the intention-action gap or intention-behaviour gap.

As a money mentor coach I see it often with clients and their finances; they set financial goals and then let them slide.

The best of intentions We start out with the best of intentions, knowing we need to cut back our spending and start saving for that goal we’ve set; the house extension, new car or boat, the holiday or starting the retirement fund. Then life just seems to get in the way and our best intentions slip and we don’t get around to it.

This intention-action gap thing is pervasive; it doesn’t just relate to our finances. Most of us will have experienced this behaviour when thinking about healthy eating or exercise, or the lack of them.

“My new year’s resolution will be to exercise for 30 minutes a day, four times a week,” you say to yourself, eating your third helping of Christmas cake while prone on the couch. And the end of January rolls around and you still haven’t got off the couch.

Why do we let it slide?

A couple of reasons: we know that getting into a fitness routine and healthy eating will have long-term benefits, but watching the next episode of our favourite TV show is more gratifying in the moment.

Or the intention-action gap can result from being too ambitious. So, we don’t start as we don’t really believe we can do it.

Simply knowing what we need to do isn’t enough; we need to take action. How do we do this?

Accountability partner: One way is to have an accountability buddy, someone who has “nagging rights”. You give them permission to help you keep your commitment, whether it’s going to the gym or sticking to a savings plan. This works even better if you are also helping your buddy be accountable for something they’ve committed to as well.

Commitment device: Another way to bridge the intention-action gap is to put in place a “commitment device”. This can be as simple as setting up an automatic transfer to your savings account the same day you get paid, so you never see the money.

Have a look at stickK if you want to know more about how commitment devices work.

Commitment contract: Entering into a commitment contract that says if you don’t do what you say you are going to do, you forfeit something or give something that is of value to you to a charity. Again, you can set this up with your accountability buddy or you can use an app or website to keep you on track.

For this to be successful and really work, you must: 1. Recognise there is an intention-action gap you want to do something about.

2. Find a commitment method that you know is going to keep you on track.

3. Remember this is your commitment to change, not your buddy’s or the commitment device. If you aren’t totally committed, it won’t work.

Opportunity for change Why not rethink your vision of the future, or if you haven’t given it a lot of thought create one for yourself.

There is no time like the present, with all this financial uncertainty, to reinvent your finances and change the way you do things so your future will be brighter.

A great way to overcome blocks and emotional money connections is to chat with someone who understands the psychology behind money.

And that is exactly what I do. I help people push through money blocks and make their finances work for them.

If you want to change the way you think, feel and behave with your money, then head to moneymentalist.com and come and talk to me.

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PERSONAL FINANCE

Does KiwiSaver Make Sense if You’re Self-Employed?

KiwiSaver tends to be an afterthought for sole traders, freelancers and contractors, but it has its advantages, writes David Copson, Head of Growth at Booster.

When you’re busy running a small business it can feel like KiwiSaver is a hassle you just don’t need. With no employee contributions to boost your savings, is there any point in locking away money that you could put into your business or pay off your mortgage?

Investing in KiwiSaver has benefits beyond the employer contributions, so it’s worth thinking about carefully. There are more than 400,000 one-person (zero employee) businesses in Aotearoa, making up 71 per cent of our businesses, according to MBIE, so this affects a big chunk of our workforce.

IT'S EASY TO SIGN UP Research by IRD and the Financial Services Council shows that self-employed New Zealanders are less likely to be enrolled in KiwiSaver. While employees are now automatically enrolled, if you're selfemployed it's also easy to become a member. You can sign up with any provider directly, and using a fund finder can help you choose the right type of KiwiSaver fund for your situation.

LOCKED-AWAY SAVINGS

THE OBVIOUS BENEFIT The big benefit for self-employed KiwiSaver members is obvious: you put in $1,042.86 over the year and receive $521.43 from the government. This is effectively a 50 per cent return. If you do nothing else, get this contribution as an absolute minimum.

Because there’s an annual cut-off date and it can take a few days to process payments, it’s best to pay the money in over the year rather than trying to remember to make an annual one-off payment. Paying in $21 a week (or $87 a month) ensures you get the maximum contribution.

A free $521 a year might feel like a drop in the bucket, but it can add up to a surprising sum. Start in a KiwiSaver balanced fund at age 35, and your $1,042 plus the government contribution could grow to around $107,000* by the time you’re 65. *not adjusted for inflation (sorted.co.nz/tools/kiwisaver-calculator) WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 7 6

Self-employed Kiwis often prioritise spending on their businesses, and the idea of locking money away until you’re 65 can seem like a major drawback.

But that drawback can also be an advantage. It’s the “pay yourself first” principle and it can help grow your wealth faster.

You might be thinking, “My business is my retirement fund”, and I hope that works out brilliantly. But as recent years have illustrated, you just never know what’s around the corner; a major event could put a big dent in your business income. If you pay yourself first, you'll make sure you will have something put away for your retirement..

BO O STE R

‘The pay-yourselffirst principle can help grow your wealth faster.’

KIWISAVER DIVERSIFICATION The small business owner is usually 100 per cent committed to the business. It’s natural to give your business everything so it thrives and brings you a good income.

KiwiSaver can give you diversification, beyond your business, so you’re exposed to more types of businesses and industries around the world. This helps reduce your risk while you build your wealth.

HOW MUCH SHOULD YOU PUT IN? If you’re considering investing in KiwiSaver, you can start at the $21 a week that will secure the maximum government contribution, then increase it to $50 a week and see how that goes. As your business grows keep reviewing annually to see if you can afford to increase your contributions.

Alternatively, you could treat yourself like an employee. For instance: Income: $100,000 Three per cent “employer” plus 3 per cent personal contribution: $6,000 Payment into KiwiSaver: $116 a week

KEEP INVESTING It’s natural to be nervous about locking away money, so if you’re really reluctant to put more than the minimum into KiwiSaver, look for a similar managed fund that gives you the same diversification, but you can take your money out at any time.

This article provides general commentary only and is not, and is not intended to be, financial advice as defined in the Financial Markets Conduct Act 2013. It does not fully consider your personal financial situation or goals, does not recommend a particular investment product, and is not a substitute for obtaining financial advice from a Financial Advice Provider.

Booster Investment Management Limited is the issuer of the Booster KiwiSaver Scheme. Product Disclosure Statements are available at www.booster.co.nz WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 7 7

PERSONAL FINANCE

The Need to Strike a Balance over NZ Inc Support “Home country bias” is a welldocumented tendency for investors to favour companies from their own country or region, but a portfolio balance is essential.

How do you invest in New Zealand while also maintaining a well-diversified portfolio?

Most Kiwis like the idea of supporting local businesses, not only the established names but also exciting start-ups. It’s a global phenomenon: the “home country bias” is a well-documented tendency for investors to favour companies from their own country or region.

But the risk associated with this bias is that you invest too much in local opportunities and miss out on international diversification. You need to strike a balance, says Pedro Machado, investment specialist at Booster.

“Diversification is essential, so having exposure to local investments requires that we balance this with international investments,” he says. “Booster aims to invest broadly across asset classes, industries and locations, although individual funds vary in their asset mix. Our team manages our portfolios, so we have the right amount of exposure to each.

“Where it makes sense, we draw on the expertise of global fund managers who specialise in particular markets where we can’t have a continual presence on the ground. And here in New Zealand our team are experts at finding investments that add diversification, while giving local businesses and start-ups a boost.”

Mixture of shares, property, bonds and cash As an example, the Booster Balanced KiwiSaver fund, like similar funds, comprises a mix of shares (aka equities), property, bonds (aka fixed interest) and cash.

WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 7 8

Target Investment Mix 4%

Unlisted property

3%

Listed property

2% Cash and cash equivalents 19%

New Zealand fixed interest

20%

Australasian equities

19%

International fixed interest

33%

International equities

Growth assets 60%

Income assets 40%

BO O STE R

The ultimate mix in this particular fund is around one-third New Zealand investments and two-thirds international investments.

Long term, the fund’s expected return is 6.4 per cent per annum (after fees but before tax) and is rated a four on a risk scale that goes up to a maximum level of seven.

Tapping into NZ opportunities In addition to managing its Australian and global shares portfolios, the Booster team finds and manages a range of New Zealandbased investments.

“Our team’s local presence and experience allows us to identify opportunities for the Kiwi part of our portfolio,” says Machado.

“That’s where we can add additional value to clients and make a big impact for Kiwi businesses. Only a tiny part of our KiwiSaver balance fund is in start-ups via our Booster Innovation Fund – around 0.2 per cent – but the impact for an emerging business is enormous. For a small business, the money we invest can be the difference that gets them to market.”

The Booster Innovation Fund invests in local start-ups including in biotechnology, chemistry, physics, materials science discoveries, and data analytics. For

instance, ZeroJet makes electric engines for jetboats; Hot Lime Labs manufactures more sustainable CO2 for greenhouses; and Opo Bio Aotearoa produces lab-grown meat.

managing director of Waimea West Hops in Nelson. “It’s enabled us to go from a small, middle-of-the-road business to what, from a scalable point, we hope will be one of the leading farms in the next few years.”

“We also invest in established local corporates like Fisher & Paykel and Auckland International Airport,” Machado says. “But we find it’s the smaller unlisted businesses that resonate with our clients much more than the big listed corporations – and we’re a nation of small businesses, with 97 per cent of Kiwi businesses having 20 employees or fewer, according to MBIE.”

With a passion for New Zealand and strong diversification, the Booster team aims to deliver outstanding results for investors and the local economy.

Aotearoa’s agri sector strength Approx another 1.75 per cent of the Booster Balanced KiwiSaver fund is invested in Booster’s Private Land and Property Fund (PLPF). This fund owns agriculture and horticulture properties like dairy farms, vineyards, hop gardens and kiwifruit orchards.

KiwiSaver clients may have a small exposure to these agri assets, but the money helps those businesses expand and grow.

“From an overall business point of view, the investment has allowed us to double, if not triple, our production,” says Ben Giesen,

“Investing in these areas is just a small part of our funds,” Machado says. “But there is a meaningful impact to New Zealand businesses, so a small allocation from a big fund has an outsized positive impact on the ultimate recipients and that can only be good for our economy, and country as a whole.”

Booster Investment Management Limited is the issuer of the Booster KiwiSaver Scheme, Booster SuperScheme, Booster Investment Scheme, Booster Investment Scheme 2 and the Booster Innovation Scheme. Product Disclosure Statements are available at www.booster.co.nz

WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 7 9

What’s for sale.

What’s for sale.

What Whatit’s it’sworth. worth.

thousands of property coverDiscover thousands of property listings right across the country ngs right across the country FREEestimated estimated values based free based d freeand estimated valuesvalues based on the very latest sales figures. the very latest sales figures.

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T H E R E N TA L B U R E A U

The Thrill of ‘Naked Letting’ has Arrived ‘Naked Letting’ is an entirely virtual service and offers a unique way for owners and tenants to start a new relationship.

Calling all private landlords in Auckland. If you are a hands-on self-managing Auckland property owner who wants to meet and choose your prospective tenants, but doesn’t want the hassle of all the admin, this is the service for you. We’re sorry it took us so long.

What we do: •

Arrange professional photos

•

Arrange viewings

•

Vet and summarise tenants that you shortlist

•

Create the tenancy and bond lodgement forms for you and your tenants to sign electronically.

What you do: •

Meet and greet the prospective tenants at the viewings

•

Tell us who you like

•

Approve an application

•

Take over the relationship once the tenancy agreement is signed.

Two-way interview The revolution is here. Have you ever used

a casual letting service only to find that you just wanted to meet the tenants yourself and get a good feel for the person who you’ll be having an ongoing relationship with?

At The Rental Bureau we believe that meeting the prospective tenants at a viewing is a two-way interview.

As a customer-focused property management company we take time at our viewings to talk to tenants and in addition to telling them about the property we tell them how we manage the property for them and for the owner too.

Then the tenants can decide whether the home and our services are right for them.

Like a first date This is the reason we have never offered the traditional casual letting service, whereby we select tenants for owners and then hand over the relationship. We really value the time spent at viewings, and see it as the starting point of a strong relationship. We think of it like a first date – you wouldn’t skip the date and jump straight into a relationship!

With this in mind, we’ve carefully developed and launched “Naked Letting”.

This is an entirely virtual service, where we simply facilitate the introduction of tenants to owners and their properties, and make sure everything is done properly along the way.

The service is currently being trialled and we are monitoring and reviewing our customers’ experiences – owners and tenants.

The cost will be $795+GST for the service, which includes up to four viewings over two weeks, four applications processed and oneon-one time over the phone with our agent for advice and guidance.

Professional photography is currently $225+GST and includes a 3D walkthrough.

During the trial period, which has been extended to June 30, we will be discounting our letting service from $795+GST to $500+GST.

WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 8 1

PROPERTY

Brace Yourself for the Bath Tub Experience After the GFC house prices fell, then went flat for a while, before starting to rise again – the shape of a bath tub. So grab your robes, we could be in for a similar dip, writes Kelvin Davidson.

Over the first three to four months of 2023, property sales volumes have remained very low, and house values have continued to fall in most parts of the country.

However, our reading of the tea leaves suggests this downturn could now be in its final stages, for better or worse (depending on whether you would like to buy property or already own it). But don’t equate the end of a downturn with the start of another strong upturn. Indeed, an extended flat patch now looks likely.

The market in numbers Over the past 12 months there have only been around 60,000 properties change hands, which is the lowest figure since the early 1980s, at a time when the housing stock was also much smaller than it is today. Finance-approved buyers have been taking their time, knowing they are in the ascendency when it comes to bargaining power. However, because unemployment remains very low, few vendors are genuinely “forced sellers” either – meaning they can take their time too.

A quiet market in terms of activity tends to lead to downward pressure on property values and we’ve certainly seen continued falls lately on the CoreLogic House Price Index. In the three months to April, national average property values WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 8 2

dropped 2.6 per cent, with areas such as Whangarei, Gisborne, Kapiti Coast, Porirua and Rotorua in excess of 4 per cent falls.

Of course, some areas have been more resilient: Christchurch only down by 1.3 per cent, Nelson 0.5 per cent, and Queenstown actually rising 1.9 per cent.

CoreLogic Buyer Classification data shows that even in this quiet market first home buyers have retained a strong share of activity, accounting for 25 per cent of property purchases in the three months to March. Cash multiple property owners (including investors) have also been a solid presence, with 15 per cent – a record high for them. But with low rental yields, high mortgage rates, and tough deposit and tax rules, mortgaged MPOs are battling; their market share of 21 per cent is a record low.

No downturn lasts forever …

There are now signs, however, that the market may be poised to flatten out. After all, the generalised peak for mortgage rates means that borrowers can now quantify their “worst case”. It may not be pleasant, but at least it probably won’t get worse.

The stock of listings on the market is dropping (with the new listings flow each week still very subdued), net migration has soared, the labour market remains pretty resilient, CCCFA rules have eased,

and we’re also about to see the LVR regime soften a little. … but don’t assume a sharp recovery To be fair, house prices remain stretched in relation to incomes, and mortgage servicing is still a struggle. Interest rates aren’t likely to fall significantly anytime soon. Physical housing supply and demand are in better balance than in the past, and caps on debtto-income ratios are set to be imposed early next year, tying house price growth more closely to wages.

Bath tubs and double dips On balance, then, these factors suggest to me that house prices could be about to stop falling, but there are also still vulnerabilities which mean a “double dip” downturn can’t be entirely ruled out, and certainly a sudden/rapid/sustained upturn seems unlikely.

Indeed, after the GFC prices fell, then went broadly flat for a couple of years, before eventually starting to rise again – the shape of a bath tub, with that full cycle taking about five years. I can readily imagine the same again this time, and I suspect most people would accept that we need a longer period of flatter house prices to allow incomes to catch up and remove a bit of financial risk from our system.

C ORELO GIC

Average Property Value

Northland

$756,050 -4.2%

CoreLogic House Price Index Percentage change last three months

Bay Of Plenty

$930,109 -4.9%

Auckland

$1,344,614 -2.6%

Gisborne

Waikato

$638,047 -6.0%

$831,893 -1.6% Taranaki

$649,164 -2.1% Manawatu/Whanganui

Hawke’s Bay

$564,989 -2.5%

Tasman

$751,134 -2.0%

$823,536 -3.4%

Wellington

$921,204 -3.8% Nelson

$810,579 -2.1%

Marlborough

$714,501 -3.6%

West Coast

$366,489 -1.8%

Canterbury

$721,105 -1.0% Southland

$461,900 -1.7%

Otago

$856,754 0.6%

New Zealand Average

$948,012 -2.3% WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 8 3

WYNN WILLIAMS

Time to Think in Commercial World Investors will benefit from a frank chat with prospective or existing tenants in the coming months, writes Andrew Logie.

Commercial property investors may have a lot to consider over the coming months. In particular, investors with leases expiring, leases coming up for renewal or due a rent review will benefit from having frank discussions with prospective or existing tenants on their current and projected financial status.

The current economic hardships don’t hit all industries in the same way. The following summarises our thoughts on the industrial, office and retail/hospitality sectors and provides some considerations for affected landlords. Seeking assistance from valuers and other professionals in your team will prove helpful for investors navigating this period.

Industrial investment Industrial investment continues to be a solid performer, with low occupancy rates driven by lack of industrial land, reduced development activity and tenants who often operate in sectors with reliable incomes.

Landlords nearing expiry or signing up new leases need to test the market and in some cases can push back on onerous or preferential lease terms presented by tenants. Investors in this position will benefit from valuation advice to extract maximum value from lease terms where the commercial setting allows.

The office Office tenants previously seeking rental certainty and “staying put” during Covid periods may now have leases reaching expiry. What Covid also accelerated is the work-from-home phenomenon. A reaction from the office leasing market is to prefer a higher grade of space. This “prime” grade space acknowledges the trend of hybrid working (a mixture of WFH and office), incorporating intuitive AV/IT systems

which allow occupants to easily transition between office work stations. To ease the transition from home to work, work spaces will increasingly need to be comfortable and generally attractive places to be.

Landlords seeking premium rents need to be mindful of this trend and engage with tenants around their future plans.

Being accommodating around potential re-fits might entice good tenants to stay rather than consider other options. With development stymied for the moment and occupancy rates remaining low in most CBD locations, landlords could be forgiven for taking an alternative view and continue with the status quo.

The right call will very much depend on the particular attributes of a given premises and the length of time left to run on lease terms.

Retail, hospitality Small-scale retail continues to face commercial challenges created by a high inflation environment and online marketplaces, and should be appropriately vetted by landlords. Some hospitality and retail could get a welcome cash injection with tourism breaking back into the NZ economy, but this will be location specific.

Doing your homework on tenants, maintaining prudent asset management practices and taking reliable security for lease obligations will help landlords’ businesses in the long run. Investors who have been in the commercial sector through previous economic downturns will appreciate the value in allocating appropriate time and resources to these tasks.

Development As with all types of property development, commercial development has been hit with

high construction costs and a lack of skilled labour. This can be seen by the reduced amount of consented commercial space coming through the authorities.

Developers who are experienced in “value add” projects could still see upsides to existing stock, the value of which has naturally fallen due to funding constraints and increases in holding costs.

Development in the industrial sector is still viable if land can be sourced. Developers looking to sell “off plan”, and investors looking to purchase these assets, need to undertake a detailed review of deals to ensure they stack up. Proposed lease terms remaining bankable, warranty transfers, tenant incentives and the substance of proposed tenants all warrant careful consideration before Agreements to Lease are concluded.

An election year can cause uncertainty generally, but this year there isn’t a long list of contentious policies that will affect the commercial property sector. We are expecting decisions to be made and deals to be done this year.

When times are good landlords can get away with negotiating deals under their own steam, but during economic uncertainty seeking advice from your team of professionals can prove useful.

Valuers can assist in crafting lease terms to maximise returns; agents can help investors pick from the best possible tenants on offer; and experienced lawyers can assist to protect assets over the course of a given lease and formalise deals struck.

Andrew Logie is a Senior Associate at Wynn Williams, specialising in property. He advises on all areas of leasing, sales and acquisitions and property development, including residential infill developments.

WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 8 5

In this easy-to-read and practical guide, you’ll learn how investing in property can achieve your financial goals at every stage of your life - from buying your first home, to building a portfolio and into retirement.

‘Ed and Andrew’s book focuses on lifelong property investment and the changes in strategy needed along the way to build wealth for retirement and passive income!’

Tony Alexander, economic analyst and commentator

On Sale Now WEALTHPLANBOOK.COM

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ZODIAK MANAGEMENT

Demand for Short-Term Rentals Returns A big jump in nightly rates suggests there are not enough short-term rentals to meet current demand, writes managing director Stefan Nikolic.

Has demand returned for short-term rental accommodation yet, or are we still waiting for tourists to come back to our shores after the Covid drought?

According to Tourism New Zealand statistics, we had just over 528,000 international visitors come to New Zealand in December 2019, just a couple of months before we had our first lockdown. In comparison, December 2022 saw only 359,000 international visitors arrive in NZ, showing we still have a long way to go before we reach pre-Covid levels of international visitors.

However, when we look at occupancy rates data, we start to get a better picture of demand versus supply in the shortterm rental market. Average occupancy for December 2019 was 73 per cent and average occupancy for December 2022 was also 73 per cent. This means there must be less short-term rental properties available now than pre-Covid as occupancy rates are the same despite fewer international visitors.

When we look at the average nightly rates for these two months, we find that rates in December 2019 were $234, and rates in December 2022 were $307 – that’s a big jump. This indicates the short-term rental properties that are currently in the market are charging far higher nightly rates than was possible pre-Covid, yet are still achieving the same occupancy rates as pre-Covid, resulting in an overall revenue increase of about 31 per cent for today’s short-term rentals compared to the preCovid market.

Revenue rise If we take the unfortunate 11.1 per cent inflation into account experienced over those two years, this means there is still a 20 per cent increase in revenue after inflation.

This large increase in nightly rates suggests there are not enough short-term rentals to meet current demand. If the number of listings were enough to meet current demand, then at 73 per cent occupancy we would expect to see average nightly rates at about $260 in December 2022 due to inflation, not $307.

What happens when those missing 200,000 international monthly visitors decide to drop by?

And, if you’re still on the fence about whether it’s a good to time get started in the short-term rental market, here are some examples of short-term rental yields versus long-term rental yields for different types of properties to convince you.

One-bedroom apartment (Auckland CBD) Purchase price = $480,000 Rental appraisal = $520 per week (5.6 per cent gross yield) Short-term rental appraisal = $954 per week (10.3 per cent gross yield) Two-bedroom apartment with two bathrooms plus car park (Eden Terrace) Purchase price = $800,000 Rental appraisal = $700 per week (4.6 per cent gross yield) Short-term rental appraisal = $1,516 per week (9.9 per cent gross yield)

Three-bedroom villa with two bathrooms (Grey Lynn) Purchase price = $1,650,000 Rental appraisal = $850 per week (2.7 per cent gross yield) Short-term rental appraisal = $2,520 per week (7.9 per cent gross yield) Cash flow is king as Robert Kiyosaki would say, and short-term rental is the king of cash flow. The main thing for a property to be successful as a short-term rental, besides the location, is the presentation, so the furnishings and the property itself need to be of above-average quality.

With the FIFA Women’s World Cup coming to New Zealand in July and August this year, now is a great time to get started with short-term rental as the nightly prices during this event are through the roof.

Essentially, we will only have two months of low season this year because of the timing of the World Cup, so it really will be an excellent year for those investors willing to take the plunge.

If you want to capitalise on the upcoming opportunity the short-term rental market has to offer, but don’t have the time to do the work yourself, then please give us a call or send us an email on the contact information below. We will send you a no obligations short-term rental appraisal for your property so you can get to know the potential income you could earn with us.

Zodiak Management: zodiak.co.nz; 0800 333 325; email: stefan@zodiak.co.nz WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 8 9

PROPERTY

WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 9 0

C ATA LY S T F I N A N C I A L

Risk Insurance: Are you Paying too Much?

The answer is probably more than likely … adviser Bill McGavock offers a guide in getting the balance right.

Perhaps the question should be, “Am I maximising what I spend on insurance to ensure that I get the best results?”

We all have a limited budget to spend on insurance products. So, how do you decide where to best spend your money?

First you must ask yourself three questions: If something happens will the impact be financially devastating? What is the likelihood of something happening? And is there some way to limit or eliminate the impact?

1. If something happens will the impact be financially devastating?

If the answer to this one is “yes” then this must go to the top of the priority list.

Example: Your car is written off vs you are sick and can’t work for four months or more. You can replace what your car does relatively inexpensively. You can walk, bus, train, taxi, borrow a car, lease one, or buy a reliable runner. Problem solved.

But can you manage without your income?

There’s ACC, but it will only pay if you are off work due to an injury. Over 86 per cent of long-term disability (three months or more) is due to sickness and not an accident, so ACC won’t pay.

Even if ACC will pay, if you’re self-employed will it pay enough? ACC will pay up to 80 per cent of your declared income. This is what your accountant has been paid to reduce for tax purposes. There are also offsets for unearned income like rental income.

Then the government could pay you a sickness benefit. Yes, they could. At the time of writing that is $320.19* per week before tax. You might also be eligible for another $144* a week accommodation allowance. A total of $464.19 a week. Will that pay the mortgage and feed the family? (*Source WINZ)

If you’re 33 when you become disabled and you’re not going to work again here’s the math. Assume an income of $90,000. There’s 32 years till you’re 65, so 32 x $90,000 is $2,880,000. Where is that going to come from?

You could borrow it from friends and family.

Good luck with that.

Or see the bank. They’ll lend you the money against your assets. Sorry, but you’re not working so there’s no serviceability.

Sell an investment property or two? How much equity is in them? What will it cost to do that. Will you get a fair market price, what if prices are down?

The alternative is spending a couple of hundred dollars a month that will pay you up to 75 per cent of your income and if you’ve used a good adviser the payment will stay ahead of inflation over those 32 years.

Another often heard phrase is “But my partner/husband/wife earns enough to pay the bills.” If one person is so disabled that they’ve been off work for over three months it’s highly unlikely that the partner will be able to work full-time, if at all. They’ll either be the principle carer or they’ll have to find the money to pay one.

2. What is the likelihood of something happening?

The more likely it is, the higher up the list it should go.

The chance of your home being destroyed by fire is around 1/15,000*.

However, every working person in New Zealand has a one in three chance of becoming disabled through illness or injury for more than three months before turning 65**.

I’m not saying don’t insure your home, but you can save on premiums by increasing

your excess. Call your insurer and get some quotes. (*sources Fire & Emergency NZ (Nov 2021))/ stats.govt. nz (March 2022) (**Stats NZ 2022)

3. Is there some way to limit or eliminate the impact?

Can I be smart here to save some money?

With house insurance you can increase the excess; with contents insurance reduce the sum insured and/or increase the excess; and with car insurance increase the excess, take out third party, fire and theft cover.

A combination of the above can free up hundreds of dollars which can be spent on protecting your income. Your ability to earn an income is your biggest asset. I know it’s a cliché, but for most people it’s true.

So, do the calculations yourself. The next smart move is to talk to a financial adviser who specialises in personal risk insurance.

Make sure they’ve got agencies with all the major insurers so they can offer the best fit for you, rather than for them.

If you’re a property investor it would be a good idea to use an adviser that works with a lot of investors. They’ll know the ideal products to recommend.

Regular reviews You should also review your insurance regularly. At least every couple of years or when there’s a major life event like property purchase, marriage or separation, job change, salary increase or reduction, or the birth of a child.

Pick up the phone now and schedule a recurring event to contact your financial adviser annually. If it’s been some time since the last review call your adviser tomorrow and book an appointment. It won’t cost you anything and could save you everything.

WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 9 1

PROPERTY

The Problems with Buying a New Build Returns from property investment can be enormous and lifechanging, but be aware of the snags, warns Andrew Nicol.

Investing in a new build property is not for everyone. Don’t get me wrong – new builds come with benefits. (Of course I’d say that, my company recommends new builds as investments.)

But they also come with extra problems that no-one tells you about. In fact, there are nine main problems investors face when investing in new builds. These are all covered in my new ebook: Everything that could go wrong with your investment property (and how to fix it). (Download link below) Here are two of the top nine: No.3 – The bank won’t lend you money once your property is built New builds can take a while to get built.

It usually takes six to 18 months, give or take. And during construction things can change, making it harder for you to get money from the bank to pay for your property.

Some of these come from the bank: •

They increase the interest rate they use to test your mortgage

•

They change how they assess your expenses (CCCFA)

•

They change their lending criteria (e.g. introduce a debt-to-income ratio).

At other times your circumstances could change, and this could also stop you from getting the money. Things like: •

Your salary’s dropped

WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 9 2

•

You’ve welcomed a new baby into the family

•

You’ve taken on new debt (e.g. bought a car on finance)

•

You become self-employed.

But here’s the thing, when you sign a contract to buy a property, you legally need to pay for (settle) the property once it’s built. So, you often can’t substantially change your financial situation for the worse while your property is being built.

This doesn’t mean you have to put your family or career plans aside, but you have less wiggle room if your lending is tight.

How do I fix this?

Sometimes these changes aren’t within your control, e.g. if you’re made redundant.

But, sometimes, investors take out massive new loans or voluntarily take a lower-

paying job during construction.

If the bank is willing to lend you loads of money, doing these things might not be so bad. But if your ability to borrow is limited, taking on new debt and expenses is often not a good idea.

That is why you should also consider the following: •

Get a mortgage approval as soon as possible (some investors now get 24-month pre-approvals)

•

Speak openly with your mortgage adviser before taking on new debt (or if you plan to start a family).

No.8 – Being forced to sell your property for less money than you bought it Whenever you hear me talk about property, it’s always based on the idea that you hold

O P E S PA R T N E R S

them as a long-term investment. However, there can be genuine circumstances where you sign up for a new build and then need to sell it early.

But, for the times when things are outside your control, you might: •

Get an extended pre-approval for the finance so you don’t need to sell your property during construction

•

Talk to a financial adviser to see what your options are

•

Help you decide if a new build is the right fit for you, and

•

Take the loss and move on with your life.

•

Give you the confidence to invest.

For instance, if you: •

Can’t get the money from the bank

•

Lose your job, or

•

Go through a relationship breakup.

Whatever the reason, if you sell your property early there is a real risk you will sell it for less money than you bought it, especially after real estate agent fees.

How do I fix this?

The most surefire way to stop this from happening is to go investing with a longterm view. Some investors get to the point where they have to pay for the property (settlement) and change their minds about buying the new build. This is not a good idea.

The returns from property investment can be enormous and life-changing. So, I’m not telling you about these problems to scare you off. Rather, if you know what can go wrong with your new build, then this can:

Why would anyone buy a new build after learning these risks?

These are just two excerpts from my new downloadable guide: Everything that could go wrong with your investment property (and how to fix it).

You may have read this and think: “How are there seven other things that could still go wrong?

“And why are you telling me this when you find new build properties for investors?”

Yup – if you know the problems that can happen, then this will give you the confidence to make an informed investment.

And to do that you’ve got to know the benefits and the risks.

When you know what can go wrong with property investment you’ll know what to do when things do go wrong.

Download the guide at opespartners.co.nz/ spreadsheets-ebooks WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 9 3

I NVE ST I N YO U R S E L F

Fashion Update

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The colours and styles of winter.

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1. Moscot Zogan Sunglasses in Tortoise – $610.00, available from Parker & Co, 2. R.M. Williams Bimberi Sweatshirt – $159.00, 3. R.M. Williams Holts Scarf – $169.00, 4. COS Slim-Fit Merino Wool Turtle Neck – $80.00, 5. R.M. Williams Lady Yearling Rubber Sole Boot – $749.00, 6. R.M. Williams Robinvale Jacket – $479.00, 7. R.M. Williams Drover Belt – $159.00, 8.

R.M. Williams Yambuk Blazer – $639.00, 9. R.M. Williams Winter ’23 Campaign Imagery Featuring Kurnell type 2 jacket – $419.00 WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 9 4

FA S H I O N

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1. Kathryn Wilson Ariane Boot in Black – $359.00, 2. Ahlem Les Halles Sunglasses in Honeylight – $860.00, available from Superette International, 3. Kowtow Row Top in Sand Marle – $249.00, 4. Silk & Steel Nautica Ring in Gold – $269.00, 5. COS Pleated Wool Midi Skirt – $175.00, 6. Kathryn Wilson Kellands Boot – $220.00, 7. COS Belted Leather Shirt Dress – $760.00, 8. Kowtow Quilted Jacket – $429.00, 9. Kowtow Winter ’23 Campaign Imagery Featuring Story Jacket – $349.00, and Form Jeans – $289.00 WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 9 5

I NVE ST I N YO U R S E L F

Beating Burnout the Right Way A wellness resort on the borders of Lake Karapiro has found the stepping stones to easing stress and re-establishing a balance in life.

Burnout is no new workplace phenomenon, but it’s a term we have increasingly familiarised ourselves with in recent years.

As health professionals at Resilience Retreats have seen it shows itself in lack of motivation and concentration, being overwhelmed and like you can’t “switch off”, poor sleep leading to exhaustion, increased use of alcohol and feeling as though the only solution is to leave your job.

Burnout has traditionally been considered a condition of chronic stress in the workplace, but pressures outside work can also contribute – even internal pressures we put on ourselves. Unfortunately, for too many of us burnout has been the experienced result of prolonged periods of unmanaged stress.

Joelene Ranby, founder of Resolution Retreats, saw first-hand the need to provide a service to support organisations with the wellbeing of their people. She has seen the steady increase in mental health decline for too many of us trying to juggle the pressures of modern-day life without the tools, knowledge, rest and respite needed to take better care of ourselves.

“Internal and external mental pressure has increased over the past 10 years, particularly post-pandemic, which nobody expected or was prepared for. The government and social services can see it happening, too,” says Ranby.

“As a result we were seeing more of our guests at our retreat programmes ‘on their knees’ in terms of needing to prioritise their mental health. People from all walks of life are affected – no-one is immune.”

WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 9 6

Three key steps Ranby has three key tips for reducing risk and finding relief from burnout.

1. Be honest with those around you, particularly those who rely on you. This will make them aware they need to back off a bit and give you some space.

2. Remove yourself from the environment(s) that are contributing to pressure for at least three days; stay with a friend, go camping, or go to a retreat. While away, switch off from any connection to the pressure (e.g. log out of your work email app so you can focus on yourself and reduce those pressures).

3. Find someone impartial to talk to.

Counsellors have the relevant and necessary training and can help you compartmentalise overwhelming problems or feelings so you can see a path forward.

Top: Joelene Ranby, founder of Resolution Retreats

Carly Kibby, a mental health coach and retreat facilitator, recognises the importance of establishing healthy boundaries for our mental health and wellbeing.

Above: Nutritionist designed meals are inclusive of the live-in packages

“We become at risk of burnout when life’s demands exceed our capabilities. Physically, environmentally and emotionally. During

Top Right: A workshop taking place on one of the Resolution Retreat's women's exclusive retreats

Right: Carly Kibby, mental health coach and retreat facilitator

R E S O L U T I O N R E T R E AT S

‘People from all walks of life are affected – no-one is immune.’

– Joelene Ranby

prolonged stress our energy levels become depleted at a faster rate so it’s essential to adapt to this,” says Kibby.

based on preferences, and some may be “deal breakers” so your response should be suited to which it is.

“Establishing healthy boundaries is a vital part of our self-care and one of the most effective ways to protect our health and wellbeing. Think of boundaries as a way of saying ‘yes’ to what is aligned with our values, and ‘no’ to what is not.

2. Communicate upfront about what you need, or what is not OK with you. Be clear, keep it simple and don’t over-explain.

Stick with ‘I’ statements and communicate with the kindness in which you would appreciate receiving this information.

Ensure it is not accusatory as this may shut down communication. Explain the consequence you have chosen should this boundary be crossed and ensure you follow through, as people are less likely to honour your boundaries if you are not consistent.

“So rather than a boundary keeping people out it in fact strengthens relationships with self and others. Implementing clear healthy boundaries avoids the risk of getting stuck in the expectation that we should all be able to mind read, and instead fosters more authentic connections. Plus, you’re more likely to have your needs met.”

Healthy boundaries And Kibby has found steps for establishing healthy boundaries for our mental health and wellbeing. These are: 1. To set a boundary start by noticing where there are unnecessary stressors or perhaps where you’re not feeling valued.

Pace yourself and start small. Where would you like to implement a boundary, and what will the consequence be if it is crossed? Some will be more relaxed

3. Lastly, remember you cannot control another person’s response, only yours.

They have a choice and will either adhere to your boundary or not. You have a choice in what you do with that. Setting a new boundary can be uncomfortable at first but easier as you continue; a bit like easing into a new pair of shoes. Eventually, the discomfort lessens, and it begins to feel more natural. Always communicate kindly and respectfully, knowing you are honouring your needs, and therefore your health and wellbeing. And everyone benefits from this.

Resilience Retreats has a holistic, full-circle approach to health and wellbeing. Programmes are delivered by a team of health professionals from their purpose-built health and wellness resort on the borders of Lake Karapiro. With verifiable CPD hours, the growth of professional and personal health benefits the individual and the organisation.

Between workshops guests are encouraged to relax and enjoy the world-class facilities, which include a wellness centre complete with steam rooms and saunas, an indoor heated saltwater mineral pool, a luxury inhouse spa, tennis courts and private bush walks. Optional daily yoga, private chalet accommodation and nutritionist-designed meals are all included in the live-in programme.

Resilience Retreats run multiple training retreat programmes annually for men and women, and also offer bespoke retreats for organisations.

Find out more at: www.resilienceretreats.co.nz

WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 9 7

TRAVEL

Out of the Merc and into the Grey Cruising into Aoteoroa’s best bucolic escape is a breeze if you are travelling in style, Joanna Mathers discovers.

Twisting, turning, sharp corners, sheer cliffs; it’s hard to maintain composure when traversing the steep highway that leads to Wairarapa. It’s even harder when local drivers start piling up behind you, but Remutaka Hill must be conquered if you’re to make it safely from Wellington to Aoteoroa’s best bucolic escape.

Last time I made the journey I was in a grubby Toyota, but this time I’m driving in style. And the massive Mercedes GLE, which cushions me in luxury and stability, makes the journey almost comfortable. Courtesy of rental car company SIXT, based at Wellington Airport, it’s a far more glamorous offering than I’m used to … and I’m loving it.

I’m visiting a friend in Featherston, the little sister of celebrated Greytown, and a town that’s on the up. Greytown locals claim to have the most complete street of Victorian architecture in the country; it’s packed with beautiful antique shops, bookstores and other boutique outlets that bring Wellingtonians (and others) flocking on the weekends.

Featherston has long been the poor cousin; but this too is regenerating. It’s packed with second-hand bookstores (which explains the emergence of its moniker Featherston Booktown), has a boutique cheese shop, C’est Cheese, and one of the most charming collectables stores I’ve visited, Mr Feather’s Den. It’s interesting to discover a less welltrodden centre close to the capital.

On day one of my visit my friend and I decide to take the Merc into Greytown for a little brunch. It’s late summer and the weather is lovely and after a wee stroll along Main Street we discover a quirky and yummy little spot called Cahoots.

Greytown is a long-weekend type of place – there’s so many charming spots to explore. If you are interested in history, the Cobblestones Museum is well worth a look.

WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 9 8

It’s located at the site of the original Cobb and Co coach stables and is dedicated to the early settlers who moved to the area in the mid-19th century.

Another highlight of the museum is its close-proximity to Schoc Chocolates, award-winning handmade chocolates with flavours such as chilli-and-lime and pink peppercorn, which are ideal for perking up energy when the walking gets a bit tiring.

Day one of the trip was dedicated to Greytown, but day two is all about Featherston. The town has a rather grizzly history, being the site of a massacre at a prisoner-of-war camp opened in 1942. The camp held Japanese POWs captured in the South Pacific, and in 1943, when prisoners refused to work and sat down in protest, a guard fired a warning shot. The prisoners rose to their feet and guards opened fire, killing 48 and one guard. It’s interesting to pay a trip to the park and spend a few moments in silent reflection of the horrors conflict can bring.

Rumbling tummies call for food and we head to the local restaurant, located in the Royal Hotel. This is the crowning glory of the town, built first in 1868 in colonial style, then rebuilt after a fire in 1893. The hotel offers a range of beautifully opulent rooms, complete with chandeliers and claw-foot baths, plus Brac and Bow, an eatery that acts as a focal point.

There is a large menu and they cater to many dietary requirements, but it can be slow as the place is very popular over weekends, so be prepared.

A nice cruise across the countryside is in order for the end of the second day, and the Mercedes from SIXT is perfect for the job.

While Wairarapa is best explored by bike, luxury cars are a great second choice.

The SUV also provides an amazingly smooth ride home, back over those hills, and I’ll be sure to choose SIXT again when I’m on my next excursion – there’s nothing better than arriving in style.

Your Yourfuture future isisour ourpriority. priority.

Most people have dreams.

Most people have dreams.

They dream about building a better life, a future that’s going to be They dream about building a better life, a future that’s going to be substantially different from today’s reality. But, most people wait. substantially different from today’s reality. But, most people wait.

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Our mortgage and insurance advisers work with you to ensure mortgage and insurance advisers work you to you Our are set up for success, if you are interested towith see what is ensure you are set up for success, if you are interested to see what is possible reach out we’d love to work with you. possible reach out we’d love to work with you.

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Mission Accomplished In an electric world how do you stay true to the caveat of being a sports car?

Just ask Porsche, writes Liz Dobson.

When Porsche decided to create its first electric vehicle, the Taycan, the foremost factor had to be that it stayed true to its sports car heritage.

So when you sat in it, it didn’t feel different from its 911 GT3 or Carrera siblings, and when you drove it the Taycan had to drive like any other Porsche sports car, with the same performance and handling.

It is a Porsche, through and through.

Although Porsche is part of the overall Volkswagen Group, it hasn’t rushed into the electric vehicle race. Instead, gauging its customers, it knew that when it came to an electric vehicle it couldn’t be too outrageous or too sedentary.

Porsche introduced the Taycan as a concept car, called the Mission E, at the 2015 Frankfurt Motor Show. I attended the press days, and at the time the focus was the increase in the power of the 911 sports car, with no thought that eight years later pure WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 1 0 0

electric would represent nearly 20 per cent of total new vehicle registrations in New Zealand.

Instead, when I checked out the Porsche stand I was impressed that the Mission E looked like a four-door futuristic version of the 911.

Fast forward to September 2019 and Porsche unveiled the production version of the Taycan (pronounced “tie-kahn”).

The all-electric Porsche arrived in NZ in 2020 and was a hit for the local distributor.

Porsche New Zealand had a small number of display vehicles to tour its dealerships, with first customer deliveries late in the fourth quarter of 2020 and early 2021.

Porsche has the answer I was in the Auckland dealership for just an hour when four people came in to order the vehicle. They varied in age, from people with young kids to existing older Porsche

owners … and they were all excited to see the Taycan.

At launch there were three models available: the 4S, the Turbo and the top-spec Turbo S. And before you say that you can’t call a non-internal combustion engine a “turbo”, Porsche has the answer. Since it first arrived on the 911 in 1974, Turbo has become a subbrand, denoting the fastest models in every model line.

When it was launched here its main competition was the Tesla Model S, but it had it all over the American brand.

That’s because it stayed true to the caveat of being a sports car. Outside, it looks like an elongated 911 rather than a small Panamera sedan, while inside it looks like every other Porsche, down to the drive mode dial on the steering wheel, that scrolls through five settings: range (like an eco mode), normal, sport, sport plus and individual.

It had a 93.4kWh lithium-ion battery producing up to 500kW of power and 850Nm of torque, with 0-100kph in 3.2 seconds and a top speed of 260kph.

Based on a new “J1” platform, the battery sits between the two axles, each with a motor attached, four-wheel steering, suspension loosely related to the Panamera and a rear-

MOTORING

‘I was in the dealership for just an hour when four people came in to order one.’

mounted two-speed gearbox allowing the Taycan to reach its accelerative potential from take-off, but boost efficiency once you’re up and running.

Now Porsche New Zealand has added the GTS to its lineup, priced from $267,700 (at the time of print).

GTS stands for Gran Turismo Sport and it has a range of 354 kilometres with 0-100kph in 3.7 seconds via launch control.

Dial in sport and you feel that power and overtaking can be too brisk as you’ll find yourself well over 100kph within seconds.

But if you really want to have fun, select sport plus and start from zero, like a motorway onramp, and you get pushed back into your seat.

Thanks to Porsche’s ethos of it being a sports car, the handling and steering of the Taycan is what you’d expect from this brand; in sport mode around winding country roads the car hugged the curves, giving a dynamic drive and that’s also down to the fact that its centre of gravity is lower than a 911.

Battery regeneration But there is one downside to Porsche’s promise and that’s only one level of regeneration of the battery, via the

touchscreen, and only in charge and normal modes. In recuperation mode when you take your foot off the accelerator it eases off the power rather than maintain it or even add to your range as you would in Audi’s e-tron electric SUV. Porsche NZ says the reason the Taycan doesn’t have a three-level system via steering wheel paddles like the e-tron is again that it is staying true to being a sports car.

But if you are still after a big, powerful, petrol Porsche then don’t worry, you’re covered. The brand recently had the global launch of the latest Cayenne large SUV, due in NZ later this year. And if you want something a little smaller, the new Macan medium SUV will launch in early 2024.

The new Cayenne debuts here with four engine versions. An extensive refinement of the four-litre V8 biturbo engine developed by Porsche replaces the previous V6 engine in the new Cayenne S. With a maximum output of 349kW and a torque of 600Nm (25kW and 50Nm more than its predecessor) it accelerates both the SUV and the SUV Coupé to 100kph in 4.7 seconds.

In addition, the output of the four-litre V8 biturbo engine of the Turbo GT has been increased 14kW to 485. The Cayenne Turbo

GT accelerates from zero to 100kph in 3.3 seconds, with a top speed of 305kph.

Plenty of options Entry to the Cayenne world comes with an optimised three-litre V6 turbo engine. It now generates 260kW and 500Nm, which is 10kW and 50Nm more than before.

The six-cylinder engine also forms the basis for the power train of the Cayenne E-Hybrid. In combination with a new electric motor that has been improved by 30kW to 130kW (176 PS), the combined output increases to 346kW (470 PS).

The line-up starts from $165,200 to $369,900 for the Cayenne Turbo GT Coupe.

Porsche will be launching the Macan early next year, with petrol versions and a fully-electric model too. You can expect to see the popular Macan GTS in the line-up with this luxury SUV one of my favourite vehicles thanks to the performance and superb sounding engines.

Don’t expect to see much of a change in the design of the Macan either, with its styling a stand-out against competition such as the likes of Audi’s RS Q3.

Liz Dobson is the former motoring editor of the NZ Herald’s Driven publication and website. In 2020, she established AutoMuse.co.nz and in 2022 was made a judge for Women’s World Car of the Year.

WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 1 0 1

R E S TA U R A N T R E V I E W

A Score of 10 out of Eight Eight, Cordis Auckland Hotel 83 Symonds Street, Grafton eightrestaurant.co.nz I love a luxury hotel, and I love a buffet, but usually I feel let down by the selection.

It’s often dry rolls, limp salads, sad shrimp cocktails and a fatty carvery – fine in 1972, drearily dated in 2023. But my oh my, Eight is not one of those buffets.

The jewel of Cordis Auckland’s spectacularly dazzling crown, Eight is a gourmand glutton’s paradise, complete with Charlie and the Chocolate Factory fountains. Featuring eight eateries specialising in different international food (Italian, Japanese, American grill, et al) it’s a place where food gorging dreams come true. And the food is genuinely delicious.

My dining companion (life partner) and I had the night off child duty and were free to gobble with impunity. His first plate was packed with veges from the salad bar and dahl from the curry restaurant; I chose risotto balls, halloumi (cooked on the spot) and a range of smoky barbecue vegetables.

They were all delightful and a tantalising taster of what would be a long night of gluttony.

My next plate was dedicated to kaimoana, which was perfectly prepared. I chose a clattering of prawns and oysters, but there’s a plethora of other options. The bloke chose sushi and salad (again), which was excellent.

The wine kept flowing (it’s not included in the price, but the wait staff are so attentive it’s hard to decline), the conversation was excellent, and belts were duly stretched.

Space for dessert I have recently acquired a sweet tooth after decades of being a savoury person, and I knew I needed to leave space for dessert.

Alongside comfort food like sticky date

and bread and butter pudding, there were French delights like mille-feuille, vegan treats (chia pudding), ice cream, and those white and milk chocolate fountains designed for dipping marshmallows, pineapple, or a range of other freshlychopped fruits waiting to be skewered.

‘The jewel of Cordis Auckland’s spectacularly dazzling crown, Eight is a gourmand glutton’s paradise.’

It’s all an extravagance, but a delightful one. And it seems to be popular as a party destination, with 21st birthdays and graduation parties in full swing at large tables nearby.

Decadent, delicious It’s not an intimate dining experience, so if you’re after a romantic night out the clatter and queues for food may not be suitable.

But it is decadent, delicious … and rather outrageous.

For two hours of all you can eat you will pay $119 between Tuesday and Thursdays; $139 or $149 Friday and Saturday respectively; and $129 on Sundays. There’s an extensive wine list, personalised service, and you are guaranteed to head home full and happy.

- Reviewed by Joanna Mathers WI NTE R 2 0 2 3 | I N F O R M E D I NVESTO R 1 0 3

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Unwind in the peaceful settings of Lake Karapiro. Prize includes luxurious private chalet accommodation for one, all nutritionist meals and a complimentary Flowpresso lymphatic drainage treatment. Activities range from gentle, daily yoga and group fitness sessions to cooking classes, nutrition workshops and leading health and education workshops. Access to the wellness centre’s five-star facilities including the luxury spa, saunas, steam rooms, indoor salt swimming pool, yoga chalet, tennis courts, private bush walks and jacuzzi.

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