JUNO Summer 2020 – Money and Your Mind

KIDS ARE WATCHING Are you passing on your bad habits?

SIR JOHN KIRWAN How to get through Covid-19 stress

MILLENNIAL DEBT

What the future holds for the next generation

9 772422 894000

NZ$9.95 INC. GST

INVESTING IN A PANDEMIC

WHAT’S YOUR SAVINGS STYLE?

WHERE TO BUY A RENTAL

BEST PLACES TO RETIRE

Exotic Asia • Investment Fashion • Summer Décor • Investor Stories

change “ Global from Covid-19 has brought big winners and losers ”

M I K E TAY L O R Execut ive Dire ct or, Foun de r & CEO

Businesses that could adapt quickly to an online environment have thrived, whereas those stuck in the old world have struggled.

This change has brought big winners and losers. Businesses that could adapt quickly to an online environment have thrived, whereas those stuck in the old world have struggled. With the notable exception being home improvement.

We were stuck at home for so long, many had more time to think about the home they want to live in. And now with international travel restrictions and up and down local alert levels, many households re-allocated the holiday budget to renovation.

A vaccine due in 2021 could see market leadership change back from tech, to recovery stocks like travel and tourism. However, I would caution against this view as the trends in place are likely to continue, regardless of when a vaccine arrives. The changes to consumer behaviour are permanent. Many of us work from home more often despite no longer being in official lockdown, and many employers have embraced flexible working hours.

Pie’s investment team keeps a close eye on these trends as part of our active management strategy, which helps us build wealth for our clients.

Boutique, bespoke, for you.

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

Inve s t me nt Ma na g e me nt

P I E F U N D S . C O . N Z

To download the Product Disclosure Statement and Statement of Investment Policy and Objectives, visit piefunds.co.nz, companiesoffice.govt.nz/disclose. Past performance is not a guarantee of future returns.

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Learn how to become a successful property investor every day by subscribing to the Property Academy Podcast.

Every single day, a new 10-minute episode is released by your hosts, economist Ed McKnight and property investor Andrew Nicol.

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Contents IN THIS ISSUE

REGULARS

14. JUNO Exchange Fear of missing out is driving house sales, readers were told at this free JUNO event.

16. Subscribe to JUNO Subscribe to JUNO magazine for a year, for just $20.

18. What We Like A selection of the hottest products, services, and places from around the country.

98. Book Reviews JUNO reviews two of the latest hot reads.

99. JUNO Junior Get your kids learning about money with our fun page to help improve their financial literacy.

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YOUR INVESTING

22. Money and Your Mind

40. How to Invest in a Pandemic

Spend, spend, spend? Or save, save, save? Mixed messages are taking their toll on Kiwis, says Money Mentalist Lynda Moore.

History tells us that if you can feel the fear and ignore it, markets generally come through pandemics unaffected, says Swati Puri.

26. The Tricks Your Mind Plays on You

46. The Millennial Debt Monster

Our brains are complex, so the decisions we make aren’t always the right ones. Martin Hawes tells you why.

Over the pandemic, we’ve racked up huge amounts of debt.

Bernard Hickey sees what’s in store for the next generations.

30. What Are You Teaching Your Kids?

49. For Richer or Poorer

How you spend or save money can have a long-lasting effect on your kids’ mindset, say researchers.

Compound interest can get you rich faster. But it can also get you into debt faster. Paul Gregory explains the maths.

33. Why Conservative Funds are the New Black

60. Where Should You Retire?

With term deposits at record lows, Kiwis are turning to conservative funds a for a better return, says Mike Taylor.

Have you always dreamed of moving by the sea, or are you happy where you are? Diana Clement looks at what you’ll need.

36. A Million Dollars Better Off

64. Jake Millar’s Unfiltered

You could be more than a million dollars better off at 65 if you’ve seen a financial adviser. says Brenda Ward.

Sir John Kirwan is known for playing rugby, but he’s vocal in the fight against depression. He explains how to cope in a crisis.

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SUMMER 2020

The beauty of trading Trading the financial markets is more than just placing a trade.

We’ve been helping traders discover, develop and devise their trading strategies since 1989.

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YOUR INVESTING Property

66. Data Versus Emotion When you’re investing, put your emotions away and look at the numbers instead, says economist Ed McKnight.

70. Investors Under Pressure There are a lot of new regulations coming, says Bindi Norwell.

72. How to Invest Outside Your City You like living there, but your own neighbourhood might not be the right place to invest, says Andrew Nicol.

80. What Goes Up in Value Quicker?

Is it better to buy a standalone house, a townhouse, or an apartment? Economist Ed McKnight has the answer.

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84. How Did Your City Do? Bindi Norwell of the REINZ drills down in the property data.

86. Wanted: Businesses to Buy If you’re wanting to sell your business, there couldn’t be a better time. Buyers are lining up, writes Brenda Ward.

90. Business Vision Innovative Kiwi companies making their mark on the world.

LIFESTYLE

The Good Life

92. Essentials Add an art nouveau spin for a grown-up summer décor.

94. Exotic Sights in Asia 84

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Asia is a feast for the senses, says Claire Connell.

96. Dress for Success Investing in these must-have pieces for your wardrobe.

YOUR INVESTING Market Reviews

104. Going Up, Going Down Cameron Bagrie looks at the economy.

106. Snapshot A quick at global events that could affect your investments.

108. Tips for the New Investor Low-cost share platforms have turned Kiwis into hobby investors. Chris Smith has tips to turn amateurs into pros.

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112. Will Inflation be Back?

Government debt is huge and banks are printing money.

Will we see inflation back, asks Andrew Kenningham.

WORLD CLASS WINES HAWKE’S BAY SEASONAL DINING LUXURY LODGES BOUTIQUE COTTAGES

THE PEAK OF LUXURY Under the spectacular escarpment of Te Mata Peak, Craggy Range Winery presents a second-to-none visitor experience. A short stroll through the vines from our luxury accommodation, enjoy a seated tasting in Cellar Door or Head Chef Casey McDonald’s Hawke’s Bay menu in an intimate, comfortable & relaxed space.

253 Waimarama Road, Havelock North, Hawke’s Bay, New Zealand | +64 6 873 7126 | www.craggyrange.com

Published by: Brenda Ward JUNO investing magazine, Level M, 17 Albert Street, Auckland Central, Auckland. junoinvesting.co.nz

A Money Coach Changed My Life No one wants to think about retirement when you’re young. So, we didn’t.

It was normal among the people we knew that there wasn’t a lot left over after paying off a mortgage at eye-watering interest rates of 7 or 8 per cent, after maternity breaks, kids’ clothing, schooling and sports trips.

But we did have something of value: a house. We joked that we could never retire – we lived in Auckland and had a mortgage.

KiwiSaver was our only investment. Over the global financial crisis and the years after it, ours never rose over $10,000.

Then I went to a seminar run by a financial advice firm and I got the facts. Life was a road and unless we acted now, it was headed straight to a miserable retirement, not to financial freedom.

NZ Super was a paltry amount – or wouldn’t be there – and we’d need to get into gear to top it up.

We booked a free session to get a financial plan.

Our lives changed. It was like having a gym trainer.

He looked at our bank statements and found money left over. If we paid off the mortgage, we could put that money into savings, he said.

We were doubtful. But we did it. We downsized, paid off the mortgage, lived on less than one salary and saved money. Investments grew. They doubled. They tripled.

When I became editor of JUNO, I was surrounded by inspirational people who knew about money and we got even better at managing spending and saving.

I stopped buying coffees, which helped pay for holidays. I found cheaper power and phone plans, which paid for brunches now and then.

Our adviser would push us a little bit further each year, like the trainer at the gym: just one more…

I can’t be the only Kiwi who had no financial education at school and didn’t really know where my money was going.

If you’re like us and didn’t think there was money to spare, I hope reading this magazine will spur you to get some advice to help you get to your goals faster.

JUNO is an investment magazine published quarterly by Brenda Ward.

You need JUNO magazine’s written permission to reproduce any part of JUNO. Advertising statements and editorial opinions in JUNO reflect the views of the advertisers and editorial contributors, not JUNO magazine and its staff.

JUNO’s content comes from sources that JUNO magazine considers accurate, but we do not guarantee its accuracy.

Charts in JUNO are visually indicative, not exact. The content of JUNO is intended as general information only, and you use it at your own risk: JUNO magazine is not liable to anybody in any way at all.

JUNO does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions.

JUNO magazine does not give any representation regarding the quality, accuracy, completeness or merchantability of the information in this publication or that it is fit for any purpose.

Brenda Ward JUNO Editor

To advertise in JUNO, you must accept JUNO magazine’s advertising terms and conditions. Please contact anita@ junoinvesting.co.nz about advertising.

Publisher and Editor Brenda Ward – brenda@junoinvesting.co.nz

Resident economist Ed McKnight

Art Director Mark Glover

Printer Crucial Colour

JUNO is printed on environmentally responsible paper. The paper is produced using elemental chlorine-free pulp, sourced from sustainable and legally harvested farmed trees. The magazine is recyclable.

Advertising Manager Anita Hayhoe

Distribution Crucial Colour and Marketing Impact

PRINT ISSN 2422-894X DIGITAL ISSN 2422-9741

Proud printers of

Commercial Offset and Digital Printers

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SUMMER 2020

www.crucialcolour.com

Could you get better KiwiSaver returns?

Our funds are top performers!

We are proud to say all three of our funds have been ranked as #1 for the 12 months to 30 September 2020, according to the latest Morningstar data1.

This 12-month period includes the market volatility during February and March from the impact of Covid-19, so this is great news!

Conservative 7.5%1

Balanced 15.4%1

Growth 23.7%1

1. JUNO’s #1 ranked Growth, Balanced & Conservative funds according to Morningstar data for the 12 months to 30 September 2020 (after fees (as calculated by Morningstar) but before tax).

Pie Funds Management Limited (Pie Funds) is the issuer and manager of the JUNO KiwiSaver Scheme. The Product Disclosure Statement is available at www.junokiwisaver.co.nz Past performance is not an indicator for future returns.

Meet some of our

Contributors

CAMERON BAGRIE

MARTIN HAWES

BERNARD HICKEY

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.

Martin is the chairman of the Summer KiwiSaver Investment Committee. He’s an authorised financial adviser and offers his services throughout New Zealand.

Bernard Hickey is an economic and financial commentator who has worked as a journalist and editor for the last 30 years for Reuters, the FT Group, Fairfax and Interest.co.nz.

ANDREW NICOL

PETER NORRIS

BINDI NORWELL

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

Peter is the director of Lateral Partners. After spending five years with a major bank, he spent over 12 years in the mortgage industry and started his own mortgage brokerage.

Bindi is the CEO of the Real Estate Institute of New Zealand. She is an experienced business leader and strategist who has worked in New Zealand and overseas.

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SUMMER 2020

ANDREW KENNINGHAM

ED MCKNIGHT

LYNDA MOORE

Andrew is the chief Europe economist for Capital Economics.

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

Ed McKnight is JUNO’s economist.

Ed’s worked for the Auckland Philharmonia Orchestra and Hatch.

Now he crunches data for JUNO magazine and 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.

SWATI PURI

CHRIS SMITH

MIKE TAYLOR

Swati is a researcher and lecturer in business and management at Wellington Institute of Technology.

She has an MBA and a special interest in investment management.

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.

Mike is the founder and CEO of Pie Funds. He's also Portfolio Manager of the Pie Funds Chairman's, Global Growth 2 and Conservative Funds.

SUMMER 2020

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JUNO 13

REGULARS

FOMO hits Housing Market As sales of houses in New Zealand hit new highs, Real Estate Institute head Bindi Norwell told the Spring JUNO Exchange event in Auckland that she could see signs of FOMO, a fear of missing out, as Kiwis went to great lengths to secure a property.

Auctions are packed with bidders, she said.

“People fear that prices are just going to keep increasing in the future.”

Demand is also driven by the extremely low rates at which people can borrow money – at its lowest levels since records began.

At the JUNO Exchange event, economist Cameron Bagrie said low interest rates in banks were driving Kiwis to search for better returns as property investors.

And many parents were using the cash they didn’t spend over lockdown to help their adult children to buy houses.

But it was important for Kiwis to talk to professionals before taking major investment steps. “My advice is – get advice!”

She says some buyers have spare ‘cash’ due to a lack of international travel, and agents are also seeing some uplift from returning ex-pats.

Andrew Nicol of Opes Partners said in his business he was seeing a surge of interest in property investments, even from a 76-year-old whose son was already an investor.

The institute released September figures showing the number of properties sold was up 37.1 per cent from the same time last year, the highest since March 2017.

The reason for it is that investors realise property gets a double boost: from rental returns and capital gains over time, all using the banks’ money.

“Sales volumes around the country continue to defy expectations.

An analysis of returns from fixed interest term deposits versus property investments showed bank deposits not keeping up with inflation after tax was taken out.

An investment of $100,000 would return an inflationadjusted -0.23 per cent in 2020.

“In Auckland, the number of properties sold in September increased by 53.2 per cent year-on-year.”

Thirteen regions had annual sales volumes increases higher than 20 per cent and 10 regions had increases over 30 per cent – the highest number of regions with this level of sales volume increase since April 2015.

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There are no signs that this upswing in sales will slow down, she says.

SUMMER 2020

The cash return on $100,000 invested in property would work out at 4.85 per cent in 2020, considering tax, total costs, and inflation, he said.

SUMMER 2020

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JUNO 15

For a limited time

Subscribe for just $20 For 4 issues of JUNO (one year)

Never miss an issue!

JUNO investing magazine is a New Zealand luxury investment and lifestyle magazine which explains in plain English your financial options and how to build wealth.

It covers the share market, property investment, KiwiSaver, personal finance, the economy, books, travel, and all the good things in life you can buy when you invest wisely.

Subscribe now and get a year (4 issues) of this premium magazine for you or a friend for just $20, a saving of $19.80.

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Terms & Conditions All prices for magazine subscriptions include free New Zealand delivery. Please allow up to 10-13 weeks for your first delivery. Your subscription will begin with the next available issue in late February 2021, and in most cases your magazine will be in your hands before it goes on sale in the shops. JUNO Magazine is published by Opes Media Limited, which handles delivery and 16 JUNO |

S U M M E R 2 0 2stipulates 0 the lead time shown above. Offer expires on 21 February 2021. Offer available to New Zealand postal addresses only.

REGULARS

What We Like

A showcase of the hottest products that are the talk of the town.

Skin repair from within Collagen has become the darling of the beauty industry.

Green décor ideas Plants popular in the 70s and 80s are the hottest trend in interiors, say the owners of online plant business, Potplant Studio.

Tropical monsteras, rubber plants, and even aspidistras are the new trendsetters of the plant world, say Nicky and Josh Peauafi.

The leafy pieces add sophistication to sleek Danish styles and mid-century furniture, says Josh.

Nicky Peauafi bought her first pot plant four years ago and says she discovered a passion for interior plants.

Soon she found herself moving away from her corporate roots and working fulltime in her own online business.

The pair send stylish sought-after plants all around New Zealand from their home studio.

Says Josh: “It’s such a cool thing to do. We’ve realised how much house plants improve your mental health and wellbeing.”

The pair also do consultations, suggesting the perfect plant match for clients, depending on their personal style – and how good they are at watering and maintaining plants.

“We send out care cards with each plant. We know which ones will survive.”

The pair say their biggest market is women aged 18 to 45, who are looking for architectural plants not readily available in garden centres. www.potplantstudio.co.nz

Seltzers are becoming the sundowners of choice for summer, with their light profile and fresh and fruity flavours.

She combined high-quality ingredients to help the body stay vital and youthful – Marine Collagen, CoQ10, and Vitamins E and C – and started manufacturing it.

The product has no odour or taste, so you can blend it with coffee, tea, or water, and mix it into a smoothie.

They are Yuzu, Mint & Cucumber with Sauvignon Blanc; Pear & Ginger with Pinot Gris; and Strawberry & Hibiscus with Rosé.

Leftfield’s winemaker Richard Painter says he wanted to bring some fun and creativity to the range.

flavours, they have just 68 calories, 4.8 per cent alcohol by volume and less than a gram of sugar per serve.

“Refreshing, clean and delicious is what our tribe said they were after.”

They come in four-packs of 250ml cans, in 100 per cent recyclable packaging, for $15.99.

SUMMER 2020

“I looked at the products on the market and knew I could make something that was even more effective by using other, specialised, ingredients that work symbiotically with the body’s own processes.”

“With time, it improves skin pigmentation, helps build stronger hair and nails, and supports the protective lining of the digestive tract.”

LF Seltzer has added a botanical twist to the Leftfield vineyard’s award-winning New Zealand wines by releasing a new range of three seltzer flavours just in time for the sunny weather.

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When the founder of Aglow Collagen + Anti-Oxidants, Ilse Wolfe, had her first daughter, she was looking for a healthy, natural collagen product that was pure and easily absorbed.

“It keeps the skin smooth and supple, prevents deep wrinkles from forming, and retains skin moisture levels.

Summer Sundowners

Made from Leftfield wines, with added sparkling water and natural botanical

Almost 80 per cent of your skin’s structure is made up of collagen, but from your mid-twenties on, your body’s ability to produce new collagen declines, and existing collagen starts to break down.

www.lfseltzer.com

The company’s ethos is no landfill waste – your first order comes in a reusable bamboo jar, and the refill pouches come in recyclable paper pouches.

Aglow Collagen + Anti-Oxidants costs $65 for a 200g bamboo jar (with a 25 per cent discount when choosing a subscription). www.agloworganics.co.nz

W H AT W E L I K E

Waterside flair with a French flavour

since 2012. The redesign sets new standards for city hotels.

‘Rendezvous’, ‘café’, and ‘joie-de-vivre’ are all French concepts we love. Now the ambience of French luxury has been captured in an elegant redesign of the Sofitel Viaduct Harbour hotel.

Accor New Zealand Senior Vice President, Operations, Gillian Millar says: “The hotel’s makeover is part of its commitment to uncompromising service and elegance.

At the new Restaurant La Marée, Michelin-starred chef Marc de Passorio teams up with Kiwi MasterChef winner Tim Read.

“We’re excited to be offering locals and travellers a luxurious boutique hotel that brings the essence of French flair back to life in Auckland’s Viaduct.

Together they're bringing the best of New Zealand seafood and produce to the foodie landscape.

French Press café is a little French coffee shop in the heart of Lighter Quay. It’s become the perfect place to sit and watch the water and people with a coffee or a cocktail.

Billing itself as Auckland’s most luxurious destination, the hotel has had an extensive makeover that covers its lobby, reception, bar, café, restaurant, and the luxurious Sofitel Spa. Overlooking the shimmering Waitemata Harbour, the hotel has been a destination for VIPs, celebrities, dignitaries and guests

“Sofitel Auckland Viaduct Harbour will appeal to well-travelled connoisseurs seeking stunningly designed boutique spaces, with privacy and a sense of discovery,” says Millar.

The new-look Sofitel Spa is luring in busy people to escape for some pampering and tranquillity.

A new feature is the Sofitel’s Club Millésime, offering a range of privileges, services, and rituals for those who choose the benefits of this opulent retreat. www.sofitel-auckland.com SUMMER 2020

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JUNO 19

ISSUE 27

SUMMER 2020

Mind (noun)

The element or complex of elements in an individual that feels, perceives, thinks, wills, and especially reasons.

Merriam-Webster Dictionary

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“Man can alter his life by altering his thinking.”

— William James, philosopher and psychologist

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JUNO 21

YO U R I N V E S T I N G

01 The Spender The Spender is fairly self-explanatory. They don’t ‘do’ budgets, says Moore. “It’s all about having fun, enjoying life, spending, and worrying about it later.”

Money and Your Mind Spend, spend, spend? Or save, save, save?

Mixed messages are taking their toll on Kiwis, says Money Mentalist Lynda Moore.

She talks to Brenda Ward.

When Covid-19 dragged New Zealand to a halt, we worried about our jobs and our economy. We were told to save, so we saved.

Then when shops opened again, the Reserve Bank urged Kiwis to spend, to keep the money going around. So, we spent.

We saved, then we spent. But things around the world still aren’t getting any better. Now what do we do?

Money Mentalist Lynda Moore says Kiwis are confused.

“We’re asking, what’s going on?” she says. And she’s seeing more and more people who are anxious, uncertain, and seeking advice about their finances and their businesses.

“They’re asking, do we carry on spending? Should we be saving? This is where this whole concept of financial anxiety and ‘fight, flight and freeze’ sets in.

“Unless you’re very clear about your own financial position, what it is, and where you’re going, it is very confusing.”

Your money personality One outcome of times of uncertainty and worry is that our ‘money personalities’ become extreme in times of stress, says Moore.

Each of us has a different attitude to money, she says, formed by our genes, our parents, and our life experiences. And each of us will react differently in times of crisis.

“When we get stressed, those behaviours can be exaggerated.”

There are five broad personality types, developed by Olivia Mellan, a clinical psychologist who specialises in relationship and money issues.

“We don’t fit straight into a box and generally we will be a combination of two types,” says Moore.

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SUMMER 2020

At times of crisis, Spenders believe in worrying about the future later, says Moore: “They might think, ‘I’m feeling bad, I’m just going to go out and buy this, because I need it right now’.”

That need for instant gratification is kicking in for some Spenders. If they don’t have someone around them who is supporting them or has another money personality, they can completely let loose.

“I’ve got a client who’s doing that at the moment and I’m just very gently trying to rein it back. It’s just all caused by anxiety and uncertainty.”

If you deprive yourself, you’ll find yourself spending more, so instead just put some boundaries around your behaviour, says Moore.

“Maybe it’s habits like just drawing out a limited amount of cash, so when you get your urge to splurge, you can spend that money – but once it’s gone, it’s gone.”

02

The Hoarder

The Hoarder is the polar opposite of the Spender. The Hoarder is usually a good money manager. They’ll have budgets, they’ll know what’s going on with their money, and they tend to be more cautious.

But when they’re stressed, that behaviour can become extreme and even destructive.

Hoarders should ask themselves, ‘Is this good for my mental wellbeing?”

If you’re hoarding to the extent where you’re not looking after yourself and turning off the heat pump because you’re worried about the power bill, you need to ask whether you’re pulling back so much you’re putting your mental or physical health at risk.

“I was talking to somebody yesterday who was an Amasser/Hoarder,” says Moore.

Plus, if you’re a business owner and you’re in that mode and start shutting down, it’s really hard to grow and recover, she says.

“She’s intensely in that hoarding space. She’s almost locked down her finances completely, because she’s so worried about the future.”

“In a business sense, you need to look at how you’re going to invest and change.

You might need to bring people in to move the business forward.”

PERSONAL FINANCE

03

The Amasser

The Amasser wants to create wealth, so they tend to be forward-thinking, and they can be risk-takers, depending on which traits they’re paired with, says Moore.

planning, but they’ve got that Hoarder trait to keep them in check.

That will make sure that they’re not just out there, bargain-hunting and grabbing.

Amassers will be looking one to two years further out.

However, an Amasser/Spender has to be a bit more cautious and rein themselves in, she says.

At a time of financial disruption, Amassers are out looking for opportunities, says Moore. They’re saying: “There are a lot of really good opportunities out there, let’s look for opportunities.”

At a time of crisis, an Amasser should be looking very closely at the opportunities and not just saying, ‘Wow, it’s really good interest rates now – I’ll go and buy five houses,” says Moore.

An Amasser/Hoarder right now is probably a really good space, because they’ll be looking at what’s going on ahead, they’ll be

“You need to be monitoring and examining your choices and making sure you’re looking at the pros and cons.”

05 The Money Monk Traditionally, Money Monks generally don’t like money, says Moore. “They don’t really like having a lot of money, so they will happily give money away.

“In this environment, a Money Monk will be happily giving money away and helping everybody else, sometimes to the detriment of their own financial wellbeing.”

Many Money Monks have a strong social conscience, so they’ll be supporting local producers but potentially paying more for those purchases.

“For example, if they’re looking for a face mask, they’ll be wanting to buy locally made reusable masks, rather than disposable Chinese masks.”

They might have a pile of requests from charities sitting on their desk, says Moore, and that’s okay.

“Continue to support charities, but maybe adjust the amount that you give to each.

04

“You can say: ‘I want to do it, because it’s a good thing to do, but in uncertain times, I’m just going to rein it back a bit’.”

The Avoider

The Avoider just doesn’t want to know; it’s just all too hard.

They just want to bury their heads in the sand and hope thing are just going to come right.

Find that hard? If you have a strong urge to help and you really want to support a cause or a family member, then look at maybe using time instead of money, she says.

Some Avoiders have got someone else looking after their money, so they don’t have to worry about it, says Moore.

At a time of crisis, Avoiders are just burying their heads further into the sand.

They’re saying, “I just can’t look at my financial situation; I don’t want to know.”

Avoiders really need to get some help and get some advice at a time of crisis, says Moore. This could be from a partner, a concerned friend, or a financial advice professional.

“They really do need to pop their heads up and look at what’s going on around them.

“If they feel uncomfortable or they’re not sure what to do, they need to find someone to talk to and get some advice.

“Find an accountant, or a financial adviser, and pull your head out of the sand if you’re in that total avoidance mode.”

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JUNO 23

YO U R I N V E S T I N G

It’s a choice So, how can you take hold of your personality type and channel it for good?

“Understand that this is your natural personality and be aware when you’re getting into that mode and that you might be getting a little bit out of control,” says Moore.

“It’s actually a choice. You can choose to continue with that behaviour, or you can recognise it and say, well, I need to pull back.

She suggests treating it as a salary and dividing it into a number of weeks’ spending.

“If you’ve got money for eight weeks, divide the total by eight and put seven weeks away in a savings account.

“Transfer one week at a time into your main account, so you start to treat it as your salary, and live on that amount.”

“The way you do that is to look at your numbers and start to be aware.

Five easy steps you can take right now Find out what your financial position is right now. Don’t guess, write it down. What do I own? What do I owe? How much do I have coming in? And have much do I have going out?

“You’ve got to know what’s coming in and what’s going out. You’ve got to know those core numbers and then you can make decisions around those.”

Next, if you’ve experienced change, perhaps a job loss or a business going under, then ask yourself these questions to get yourself going forward:

Take care with pay-outs What happens if you’ve got a redundancy pay-out? Moore says you need to be careful of your behaviour around unexpected windfalls.

1. What’s happened? This isn’t the emotional story around it. This is: ‘I’ve been made redundant and I don’t have an emergency fund.’

“In our minds, we put money in ‘buckets’, and we view something like redundancy or a tax refund as a gift: ‘Woohoo, we’ve never had it before, let’s go and spend it!’

“You need to get the money out of that bucket. Say to yourself, this money has to last me a set amount of time, so I have to be careful with it.”

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2. What am I doing about this right now?

People do go into a process of fight, flight, or freeze, so ask yourself where are you right now? You might be sitting on the couch getting really angry at the world, or you might be sitting there going, ‘What am I going to do? I don’t know how to get out of this.’ Recognise where you are right now and then as quickly as possible get into the third phase.

3. What am I going to do? This is where you face the fact, ‘I don’t have a job right now, I don’t have an emergency fund’, and start to take some action.

Start writing down all the possibilities – everything you can think of to start moving yourself forward.

They’re not easy steps, says Moore, but they are necessary.

“There are no easy steps, other than perhaps cutting down on spending.”

Put you and your family first But taking a step back can help, she says.

“Stop looking at everybody else and what they are doing, and start focusing on you.

“I think that we all have a habit of looking around to see what everybody else is doing before making decisions for ourselves.

“Right now, you need to put you and your family at the top of that tree and make sure that you as a family unit are okay.

“What do we need to do to remain happy and healthy and financially independent?”

For some, that may mean selling something, or making changes to their lifestyle.

“Then, don’t worry about what anybody else might think about that decision, because you’ve made that decision for you and your family unit.”

To work out which money personality you are, try the test at www.moneymentalist.com

PERSONAL FINANCE

The Tricks Your Mind Plays on You Our brains are complex, so the decisions we make aren’t always the right ones. Martin Hawes tells you why.

For the most part, investors are human.

Sure, there are computers which trade the markets, working off algorithms while they trade at high speed in big volumes, but most investors in the market are real, live people making decisions; sometime right, sometimes wrong.

This could be good. Except it turns out that humans have some basic wiring faults.

These flaws create foibles and quirks that hold back our ability to be perfectly rational investors.

Fight or flee As a species, we grew up on the savannah with the idea that we needed food so, with danger all around, we needed to make lightning-fast decisions – fight or flee.

To be wired like this was excellent when we roamed the countryside, looking for something convenient to eat.

However, it turns out now that this wiring, so carefully planned and installed over millions of years to make our brains work in a certain way, is not so good when we want to sit at home or in an office deciding whether to buy Contact or Meridian, or, maybe, sell the Nasdaq.

The science of investing People have become fascinated by the flaws that show up when our brains are applied to investing, rather than chasing down an antelope or getting out of the way of an elephant.

Over the past few decades, a whole new area of study has opened called behavioural economics.

In a nutshell, behavioural economics shows that we’re not always rational. We have ‘cognitive biases’ – emotions and social influences which drive our behaviour and mean that we don’t always make rational decisions.

Anchoring Let’s look at a behaviour I often see when someone buys an investment which turns out to be a dog and drops in value.

Let’s say they bought a share for $2 and it’s fallen to $1.20.

Many people won’t sell because they believe that by selling, they will have made a loss. This just isn’t sensible: in fact, they’ve already made the loss and the only question is what they should do about it.

People become ‘anchored’ to the price they paid and will only sell when it gets back to $2.

And so, instead of getting what’s left of their money out and getting it to work in something good, they hold on.

This flies in the face of rational thought: after all, the thing that lost you the money is unlikely to get it back for you.

Cutting your losses is sensible and rational – but it’s not what we always do.

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YO U R I N V E S T I N G

There are plenty of ways we don’t use our rational brains to make decisions: •

•

We rush in to buy overvalued shares because we fear that we’ll miss out (FOMO).

We feel there’s safety in numbers, so we follow everyone else as they rush into or out of the market.

•

We fail to invest, because we fear a loss twice as much as we appreciate a gain.

•

We follow our brother-in-law’s hot tip for the next great thing either because we’re greedy or we don’t want to look stupid for ignoring it.

•

We look at our portfolios three times a day, reacting to each little movement, rather than taking a 10-year overview.

•

We treat a fallen share as a bargain, because we’re mentally anchored to the higher price of a week ago.

•

We buy on the basis of tips and gossip, rather than on expert information.

•

Perhaps worst of all, we exaggerate our talent and get overconfident.

These are all examples of our social and emotional selves getting in the way – and the cognitive biases that drive irrational behaviour.

Take a deep breath To overcome them, we have to slow down a bit and force ourselves to reconsider.

This means you have to have a process for investment.

How do you avoid bias?

It’s fiendishly difficult to recognise and override our biases and always behave rationally.

For example, spend some time writing down why someone is selling the company or property that you’re buying.

Here are a few that might ring true:

There are always pros and cons for every decision.

•

We use rules of thumb.

•

We invest in the housing market because we’re biased towards it, instead of diversifying more widely.

•

We work in a bank, so we invest in banks.

•

We chase winners, and judge by past performance.

Actually, past performance is no indication of future performance.

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You should look at the deal from both sides and then make a slow and rational decision.

We have to dampen our optimism and take our time.

Sure, that will mean occasionally you lose some good deals.

But missing out is always better than being knocked out.

Martin Hawes is the Chair of the Summer Investment Committee. The Summer KiwiSaver Scheme is managed by Forsyth Barr Investment Management Ltd and a Product Disclosure statement is available on request. Martin is an Authorised Financial Adviser and a Disclosure Statements is available on request and free of charge at www.martinhawes.com.

Martin is a Director of Lifetime Income, an Annuity provider and a Board member of the New Zealand Shareholders Association.

This article is general in nature and not personalised advice.

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YO U R I N V E S T I N G

What Are You Teaching Your Kids?

How you spend or save money can have a long-lasting effect on your kids’ mindset, say researchers.

Brenda Ward discovers it’s what you do, and not what you say, that helps your kids grow up rich or poor.

Did your mum hide her spending from your dad? Was your father dominating or controlling with money? Were your parents spenders or savers?

If they were bad role models, it turns out you might be able to blame them for some of your money woes.

Massey University researcher Dr Pushpa Wood says we underestimate our children’s intelligence – but they’re watching and copying us.

“We underestimate that they observe us all the time. We underestimate that they learn by observing.

“So, observation plays quite an important role that we don’t pay enough attention to, as parents.

“They’re taking note at the back of their minds, without even realising it.”

Parents affect kids’ self-control Wood’s view is borne out by a University of San Diego study that suggests that parents’ financial behaviour affects their kids, both directly and indirectly.

The study linked the financial behaviour of 2,520 young adults back to their general self-control skills and their parents’ financial behaviour.

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Study head Dr Ning Tang says the findings highlight the importance of parents giving their kids ‘financial socialisation’.

Wood says there are many ways to help your kids get better with money.

“There are some things you can teach and some things you can show, and some things you can be a role model for,” says Wood.

“For example, if you’re smoking, you can’t really tell your child not to smoke if you catch them smoking. That’s a contradictory message you’re giving them.

“However, you can sit down and discuss with them why they have taken up smoking, ask if they’re aware of the risks, and tell them why you haven’t given up smoking yet.”

She says you can give the wrong message if your kids see you shopping without a list, not keeping to a budget, buying alcohol or cigarettes, and spending too much on clothes, or treats at a café.

Money is plastic Another big problem for kids today is that money has become invisible, says Wood.

“They’re seeing mum and dad using a plastic card to pay for things. I’ve had a conversation with 6, 7, and 8-year-olds,

PERSONAL FINANCE

asking them: ‘So where do you think money comes from?’

whether it is a $150 budget or a $250 budget.”

“They said: ‘Oh, mum just goes to the machine and gets the money out’.”

Any money left or saved from the set budget could go into the child’s money box and be used towards their purchase.

“So, who do you think puts the money in the machine?” “ ‘Oh, the bank does’.”

“And why do you think the bank does that?

“We keep exploring it further, so after about 20 minutes they realise the bank puts the money in the machine because mummy goes to work every day.

“Finally, they start to form those kinds of links. Unless you link those things, you can’t actually connect the two together.”

The Why Generation Parents find it hard to explain to kids why they won’t get everything they ask for, says Wood.

“If a child wants to buy a particular thing at the supermarket, you might say, ‘Sorry, darling, we can’t buy it.’ And the immediate response comes back: ‘Why not?’”

Wood says she often hears parents reply: “Because I said so.”

“Because I said so” might have worked when she was growing up, but it doesn’t work now because kids are growing up with more access to information and technology, she says.

“You’ll be pleasantly surprised,” she says.

“I’ve heard from many parents that their children didn’t used to like any brand other than Wattie’s baked beans, then all of sudden the home brand is not too bad.”

Finally, try not to give kids contradictory messages about money, says Wood.

“If the child wants to buy a book or a toy which is $5 and you say you don’t have the money, but they see you buying a $5 takeout coffee, it doesn’t compute.

“Overseas research also shows parents’ education levels and money skills also play an important role.

“I think money management comes with your attitude to money, how you see money, and what role money plays in your life.”

One activity she uses with students asks: ‘If your wallet could talk right now, what do you think it would be saying about your relationship with money?’

Answers varied from: ‘Where the hell have you been?’, to ‘If you looked after me well when you were young, I’d have been really good to you now’, or ‘We make a good team’.

“But don’t make it a heavy thing. Money is part and parcel of your day-to-day living; it doesn’t occupy your whole life.”

Delayed gratification Wood says with very young kids, the most useful skill parents need to teach is ‘delayed gratification’.

NZ study Research by the Westpac Massey Fin-Ed Centre shows that most young people get their financial information from their parents, so it’s important that parents provide a good foundation for future financial wellbeing, says Wood.

“For too many people, little Johnnie wants something now and Johnnie will get it now because mum or dad just can’t be bothered discussing it further, or doesn’t have time and energy or resources to spend five minutes explaining why he can’t have this right now.

“Make it a ‘learning experience’ from an early age.

“It’s about an investment of time now, for the future.”

“This is ‘The Why Generation’,” she says, “and we as parents need to be able to answer those ‘whys’.”

The ‘why’ could be because the family’s on a budget, she says. “We don’t have money this week for that shopping, within this budget. It’s our responsibility as parents to use those questions, however annoying they might be, as ‘teachable moments’.

“So, if you do not have enough money to buy something your child has asked for, be honest and put the facts in front of them.

“They also need to be made aware that sometimes we have to go without things we want, but our first priority is to make sure that their needs are met first.”

Real-world experience A paper by University of Arizona doctoral student Ashley LeBaron suggests real-world experience with money will help prepare kids financially for adulthood.

Wood agrees.

“You could ask the child to help you find money for their purchase from next week’s budget, making a list and then choosing the items at the supermarket to a set budget, SUMMER 2020

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Nike shoes, Disney movies, online games, and space exploration are fun for kids.

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After demand from Kiwi parents, the share platform Hatch is launching kids’ investment accounts that allow under-18s to buy and sell shares with their parents, for just 50 cents a trade.

Kids will be able to buy shares in their favourite brands – iPhone afficionados can buy into Apple and watch the company grow.

The accounts are in their name, but the kids don’t manage them; their parents do, says Hatch’s cofounder and general manager Kristen Lunman.

Kids can sit with their parents, talk about and choose the shares, and then watch how they perform. Parents transfer the money and place the orders.

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Lunman says she thinks it’s interesting the demand for kids’ share investing has come from a generation who as kids weren’t introduced to the share markets.

“Hatch users tend to be between 28 and 60, and a large curve of these people were kids when their parents were burned in the share market crash in 1989.

“This is a whole new generation that has been raised to believe that on share markets, you lose money.

“This has led to an obsession with property, but we’re discovering these

people don’t see that as a pathway to wealth any more. It’s too hard and property’s very expensive, so they’re looking for other opportunities.

“These people have seen that share markets over the past nine years have performed incredibly well and are quite a compelling place to be for this new generation of ambitious Kiwis.”

Now they feel they have a responsibility to teach their kids another way of growing wealth, she says.

“There’s just a real sense of responsibility that we want our kids to be better off than we are.”

As a parent herself, she says it’s hard to teach your kids money lessons. “It doesn’t feel like money to them. They literally don’t understand it. They see us with cards, we don’t use cash, so kids have no concept of the value of money.

“As the market goes up and down, it’s an easy conversation to have with kids about why.

“If they’re wondering why their shares went down, you can talk about how the coronavirus caused a crash across the wider market. Or, if Nike went up, you can say sales have rebounded because the economy’s opened back up.”

Shares are a long-term investment and teach kids patience, says Lunman.

“Time is on their side. Giving their investments time to grow means they’ll ride out market waves and reap the magic of compounding returns.”

She recalls when her son realised his Take Two Interactive games shares had grown in value.

He said to Lunman: “Ooh, shall we sell them now?”

“But kids get enthusiastic when they can relate investing concepts to everyday life.

“I’m like, no, let’s think about this now.

Over 10 years, think of how much more you could get.

“These kids are surrounded by tech. They know these brands really well, and they understand future trends, like green, clean energy, electric vehicles, and even space exploration.

“We could sell today, and you could get $1000, but why don’t we just ignore it and when you’re 20 years old, that could be tens of thousands of dollars.”

“I want to be looking at the brands that are surrounding my kids and getting them to really click as to what investment is. Because a share is really just a slice of a business that you anticipate will grow.

“Funds are really just slices of multiple businesses.”

Of course, shares sometimes go down, too.

She suggests kids start small, build slowly, and let the markets do their thing.

“Regular, smaller amounts build into a sizeable portfolio over time, which is why auto-investing is a great way to get started.”

Pre-register at Hatch for a Kids Investment Account for early access. www.hatchinvest.nz/kids-accounts

www.hatchinvest.nz

PERSONAL FINANCE

Why Conservative Funds are the New Black With term deposits at record lows, many Kiwis are turning to conservative funds as they look for a better return for their money, without a lot more risk, says Mike Taylor.

In the last two decades, the average oneyear term deposit rate in New Zealand has ranged from nearly 9 per cent in 2007 to the current low of around 1.25 per cent in 2020.

But if you’re only getting rates of around 1.25 per cent now, that won’t give you enough income to live off in retirement.

Many people with money invested in term deposits are looking for better returns.

This shows investors had it easy in New Zealand in the golden days before the Global Financial Crisis. They didn’t really need to take any risk at all to earn a modest return.

Bonus Bonds closing Plus, another group is looking for a place for their money. Over a million of us chose to gamble a little with our savings returns by investing in ANZ’s Bonus Bonds scheme.

Kiwis got attached to those returns – and to term deposits.

Kiwis had around NZ$3.25 billion in the scheme, where investors received no interest on their investment, but went into a monthly draw to win $1 million, plus other smaller amounts.

Today, however, it’s a different story.

For investors looking to achieve a respectable return on their cash, the days of a 5 per cent term deposit are well behind us. Realistically, if you’re earning 1.25 per cent, with inflation and taxes, your real return is likely to be close to zero.

Term deposits were popular with savers and Kiwis close to, or in, retirement.

Bonus Bonds was attractive to people who didn’t want to take on much investment risk. On the other hand, many missed out on potential returns.

Now the scheme has closed to new investments and it will wind up over the coming months.

That leaves two sets of investors looking for a safe haven for their money, without too much risk.

One alternative that’s gaining popularity now is a conservative fund. Many savers see it as a place to get better returns, without large exposure to risk.

What’s a conservative fund?

A conservative fund is a type of ‘managed fund’. In a managed fund, your money is pooled with other investors’ money and is spread across different kinds of investments.

A fund manager chooses how the fund is invested according to the rules set out for each fund, and each investor owns a proportion of the total fund.

It’s kind of like a basket of fruit. You don’t own one banana or one kiwifruit, instead you own a proportion of the total contents of the basket. As the basket goes up in value, you share in the increase in value.

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Conservative funds are still lower-risk options. They’re diversified, meaning not all your money is invested in higher-risk shares.

High risk versus low-risk There are many types of managed fund, which all invest at different levels of risk.

•

•

•

You can invest in a high-growth fund, which can give a better return but which is riskier to own and more prone to big dips – and big increases.

You can pick a balanced fund with some highgrowth and some slower growing assets.

Or you can pick a conservative fund, which offers less of a return but is relatively low risk.

It’s conservative funds which are seeing an upswing right now. That’s because they appeal to people who traditionally invested 34 JUNO |

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in term deposits or Bonus Bonds.

Benefits of conservative funds Investors like conservative funds for these reasons: •

They give you access to a variety of investments which perform in different ways at different times – so your eggs are not all in one basket, like they are with Bonus Bonds.

•

They’re lower risk, but are designed to offer higher returns than a term deposit.

•

You can access your money within a week or so of requesting a withdrawal.

We call that ‘liquidity’. Compare that to term deposits, which are often locked in for years, where breaking the term can reduce your returns.

•

If your fund is doing well, you may get regular dividend payments into your bank account.

But there are things to note: •

There’s no guarantee of the returns you’ll get for a conservative fund. Compare this to term deposits which give you a

fixed, although currently very low, rate of return.

•

You may have to give notice of your intention to withdraw from the fund.

This can be days or weeks.

•

If the financial markets aren’t doing well, your regular dividend payments may not be very high, although over time they’ll usually beat a one-year term deposit.

•

There will be fees to pay for the management of your fund, and for the underlying investments in it. These are often a percentage of your returns.

•

Many fund managers ask for a minimum investment of, say, NZ$10,000. Check the details of the fund you might be interested in to see what the minimum investment is.

Low-cost investment platforms like Sharesies and InvestNow allow entry into many of these funds at a low cost.

What about the risk?

Term deposits are very low-risk, and the rate of return is always fixed. Lower risk

PERSONAL FINANCE

usually means lower returns, and this is true for term deposits right now. After tax and inflation, you’re not getting much back at all.

Conservative funds are still lower-risk options. They’re diversified, meaning not all your money is invested in higher-risk shares.

There’s often investment in cash, bonds, and other investments, too.

Compare different managed funds on the government’s www.Sorted.org.nz Smart Investor online tool.

Check the risk indicators on conservative funds before you invest, and check they align with your risk profile and goals.

For example, Pie Funds’ Conservative Fund is recommended for investors with a minimum three to five-year investment time frame.

That fund returned 4.87 per cent annually for the five years to 31 August 2020, after fees and before tax.

As you can see from this, even with tax taken out, the long-term return has been higher

than a current term deposit offering.

Need higher returns?

When you work out your risk profile, you might even find you’re comfortable taking on even more risk, say in a balanced fund, to benefit from potentially higher returns over a longer time.

So, if you’re looking for a new home for your money, or simply want it working harder for you, there are other options to explore.

Mike Taylor is the founder and chief executive of Pie Funds Management Limited, a fund manager. He’s the portfolio manager for the Pie Conservative Fund.

Any advice in this material is general in nature only and does not take into account any particular person’s financial objectives, goals or circumstances.

If you would like some tailored advice, we recommend you see a financial adviser. To access our product disclosure statement, please visit www.piefunds.co.nz. Information is current as at 21 September 2020. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary.

‘We’re doing OK, but we think we can do better – we’re just not sure how’ Is this you? If it is, read on.

• Are you successful in business, career, and your home life, but in a muddle with your money?

• Did the Covid-19 lockdown give you a shock when you realised you weren’t as good at managing your money as you thought?

• Is your relationship with money poor?

If you answered yes to any of these questions, the Money Mentalist can help you get on track.

Our clients include business owners and people earning six figures. We help them better understand how they behave with money, so they can reach their financial goals.

Email us at hello@moneymentalist.com. When you’re ready to talk, we’re here to listen.

www.moneymentalist.com

Definitions: Liquidity: How easily an asset can be converted to cash.

Managed fund: In a managed fund, your money is pooled with other investors’ money and is spread across different kinds of investments.

YO U R I N V E S T I N G

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PERSONAL FINANCE

A Million Dollars Better Off You could be more than a million dollars better off at 65 if you’ve seen a financial adviser rather than going it alone. Brenda Ward asks why we’re not lining up to ask for help.

Friends John and Jasper both started saving NZ$2500 a year when they were 25. But when they retire at 65, John will be NZ$1.5 million richer than Jasper.

John can buy a new car, live in a mortgagefree house, and never worry about money.

Jasper will look at his old friend with envy, buy from discount outlets in retirement, and might run out of money in his late 80s.

They save 3.7 per cent more, and they travel six times more.

And it just gets better for those who get financial advice:

Advised Kiwis save more “Our ‘Money and You’ survey found that New Zealanders who get advice save more, invest more, travel more and, overall, have improved wellbeing.”

On average, financial returns for Kiwis that get professional advice are 4 per cent better than those who don’t.

The report says: “Kiwis are in poor financial shape, and think they are in a financially better position than they actually are.”

•

They have KiwiSaver balances more than 50 per cent bigger than those who don’t.

Many of us are unable to survive financial distress for much more than a month.

•

They have greater peace of mind.

•

They have more confidence in making financial decisions.

•

They’re more likely to have insurance cover should things go wrong.

But it seems that we don’t think we’re rich enough to need advice. Nearly 38 per cent of people thought they needed more assets and wealth to make it worthwhile.

Why? John has a financial adviser.

This is the secret to getting rich faster, a survey of 2000 ordinary Kiwis run by the Financial Services Council discovered, says Richard Klipin, who heads up the council.

from getting financial advice,” says Klipin.

Faced with those facts, it’s hard to argue that financial advice isn’t worthwhile. But it seems that we’re not getting the message.

Fewer than 20 per cent of us get professional financial advice and 40 per cent don’t see any benefit to it.

Barriers to action “This shows that, as an industry, we need to do better in addressing the perceptions and barriers that are stopping New Zealanders

The cost of advice also put off people, with 39.4 per cent saying they thought it was too expensive, and 36.8 per cent saying they didn’t think they could afford it.

That’s ironic, says Registered Financial Adviser Jonty Horrocks of Element Financial.

He says his advice, and that of many other advisers, typically comes at no cost, with their payment coming from commissions from providers like your KiwiSaver provider, insurer, lender, or managed fund.

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The right time Other reasons for not getting advice included people thinking the ‘time isn’t right’.

They were waiting until they: •

Came into money, or got an inheritance

•

Were in financial distress, or poor health, or were divorcing

•

Were buying a house

•

Were nearing retirement.

Horrocks says it’s never too soon to see an adviser.

He says a lot of people start with KiwiSaver as their first investment, to buy a first home.

“They build up their cash and KiwiSaver for a house and once they achieve that goal, then over a long period of time they don’t actually have savings; they have a huge chunk of debt.

“Advice can help you really understand the power of money, how a mortgage works, and how you can structure it to pay it off faster, but still have financial flexibility when you need it.

“The quicker you can reduce the mortgage on your own home, the sooner you can start thinking about building other investments.

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“The key is having a plan,” he says.

Someone in your corner So, why are Kiwis who take advice better off financially?

Horrocks says having someone in your corner to help you reach your goals is a big help.

He says financial advice isn’t like going to a store for a one-time purchase – it’s a lifelong partnership.

“It’s about having somebody who’s going to be with you for the entire journey, helping you make decisions. Life doesn’t always go to plan, so you need an adviser who knows your goals, and how to plan for things that can throw a spanner in the works.

“Your adviser also has access to a trusted network of professionals, like investment advisers, lawyers and accountants, to build a team around you.

“These things are going to put you in a much better position than if you just tried to do it all by yourself.”

A plan cuts stress He says, down the track, people with advisers will be more engaged with their finances and in a better position mentally and financially.

“We all know the stresses that personal finances or family finances can put on our relationships at work, and at home.

“When you’ve got that clearer picture, that better understanding of your money, then life just becomes a lot easier, because you’ve got a plan.”

He says budgeting is a dirty word, because some people worry they’ll have to give up the things they enjoy like going out for flat whites and avocado on toast, but rather it’s about money management and allocating money into ‘buckets’ for different aspects of life.

“It’s more about using your money in a much better way, knowing where all your money’s flowing and if there’s any unnecessary spending.”

He says the Financial Markets Authority’s reviews are creating a much stronger focus on client outcomes for advisers.

“It’s a really good shift that gives people the confidence that they’re not going to be dealing with someone who’s just doing it for themselves.

“Honestly, any time is the right time to get advice, especially if it’s free.”

ADVERTORIAL

Make Your Money Work for You Interest rates might look scary, but it’s actually a great time to invest for growth, says Kernel chief executive Dean Anderson.

Interest rates in New Zealand have plummeted to new lows, which is great for people taking out a mortgage, but not great for those with their savings traditionally in the bank.

With about NZ$250 billion sitting in oncall bank accounts and term deposits in New Zealand, and the average interest on these accounts being less than 1 per cent, in real terms (after inflation), these savings are going backwards.

So, if you want to make your money work for you but don’t know how, read on.

We spoke with Dean Anderson, chief executive of Kernel investment platform, about the important questions for Kiwis looking to master their money.

When do you need the money?

“If you need access to your funds soon, that is, between one and three years, you’re limited in your options and you’ll still need to consider term deposits,” says Anderson.

But he says when you’re looking at a slightly longer time horizon, you open yourself up to more choices.

Anderson says your investment horizon is probably more flexible than you realise.

“It’s like with retirement – we don’t all actually retire exactly on our 65th birthday,” says Anderson.

“If you have funds that you really don’t need until ‘later’, at least five years away, then it gives you far more options to consider. That’s when you can think about investing in equities or a welldiversified index fund.”

Are you investing for income?

In the past, when Kiwis had access to higher interest rates, term deposits often served the needs of those investing for income.

However, this interest rate environment means you need to think again.

“When you’re thinking about an income stream, you need to be a bit smarter about how you invest into equities,” says Anderson.

“I suggest looking at specific sectors, for example, dividend income funds, commercial property, and infrastructure.”

Increasingly, these investments are almost a proxy for a traditional term deposit or fixed income portfolio.

The caution to investors is that you will have to ride the ups and downs of the market, which you don’t have to do with a term deposit, but you will get income and a potential for long-term growth.

Are you investing for growth?

March and April showed us that investments do have ups and downs, but what happened in the months following

was a great demonstration of how quickly markets can recover.

One thing we’ve learnt from history is that an investment in equities always recovers – you just need to be patient.

Says Anderson: “The key to successful longterm investing is getting started and then being aware of the mind-money battle.

“Switch off the news headlines and focus on your long-term goals. We get told this time and time again, but it goes against our instincts telling us that more action reaps better results.

“In investing, this is simply not the case.”

However you decide to invest your money, Anderson says the best thing to do is come up with a good financial plan, then set and forget, reviewing it just once a year or when your personal circumstances change – not in response to the latest news headlines.

It may be a financially unsettling time, but there are plenty of great ways to invest and have your money work for you.

Just as long as you’re patient.

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How to Invest in a Pandemic History tells us that if you can feel the fear and ignore it, markets generally come through pandemics unaffected, says finance and markets lecturer Swati Puri.

The world has seen five major epidemics since 1900, but it’s reassuring to know that none of them has lasted long enough to create a massive impact or ended the financial markets.

And each time an epidemic has ended, stock markets have rallied to new highs and bounced back.

What’s more, there’s never been a 20-year period where investors with diversified portfolios have lost money in stock markets.

The Spanish flu and now Covid-19 both caused tremendous turbulence and speculation, however, neither of the pandemics stopped investors making investments in financial markets.

On the contrary, investing activity increased during the Spanish flu and we’ve been seeing the same trend during Covid-19.

Markets in the Spanish fu The Spanish flu in 1919 was one of the last deadliest pandemics to test humankind.

It infected 500 million people and killed 30 million to 50 million people.

The flu came in three waves and lasted from July 1918 to May 1919, leading to quarantines, labour shortages, and an increase in the unemployment rate.

Sound familiar?

Strangely, the stock market boomed during 40 JUNO |

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the Spanish flu and the impact of the pandemic on the Dow Jones was minimal, with the market unaffected by all three waves of Spanish flu.

World War I, which was at its high at that time, had a larger impact on the stock market than the flu.

Although the Dow Jones dropped by 10 per cent during the second wave, the market bounced back as the flu cleared up.

The S&P 500 index went up by 8.9 per cent in 1919, and the UK equity market rose by 27 per cent in the same year.

What about Covid-19?

Since the World Health Organisation declared the novel coronavirus a global emergency, there have been more major swings, both highs and lows, in the last three months than in the past 12 years.

In March there were some major upheavals in the S&P 500 index amid the coronavirus crisis, with the stock market plunging 12.5 per cent, the 19th worst in history in the month of March. But, the market has been mainly moving upwards since.

The first quarter of 2020 showed some major dips in 11 sectors, including airlines, leisure products, energy, and industrials.

But 41 per cent of the industries listed on the S&P showed gains, led by oil and gas refineries, gold, healthcare, and information technology.

There were initial fears that the coronavirus could also be felt in the New Zealand stock market in February, when the stock market fell more than 3 per cent overnight, and the Kiwi dollar dropped to its lowest point since August 2015.

But, it seems the market is on the recovery phase – and there’s been a jump in the prices of stocks.

Investors’ confidence has increased in New Zealand, because of the government’s response to Covid-19, investors have more faith in the economy, and having regulatory bodies like the Financial Markets Authority (FMA) monitoring the sector.

The stimulus packages offered to industries suffering due to coronavirus have further given a boost to the New Zealand stock exchange.

PERSONAL FINANCE

What to do during Covid-19 If you believe that history will repeat in this pandemic, there are some things you can do.

Do not panic-sell when your shares go down, or you’ll lock in your losses. Be reassured that over the years, markets always go back to the mean return.

1. Overcome your fear of investment. One of the best strategies right now would be to have a disciplined investment approach and invest as you normally would, with a long-term perspective.

There is some fear and speculation around, so your best strategy would be not to buy or sell based on daily news or market movements.

When prices drop, see it as an opportunity to increase your investment in the financial markets and take advantage of lower stock prices.

Dollar-cost averaging means if you buy when shares are cheap and also when they’re expensive, you’ll get an overall average purchase price.

Many of us are investing still. During lockdown, we took advantage of lower stock prices.

Now in New Zealand, eight out of 10 adults have some form of investment, which equates to 3.2 million people.

For example, Hatch, a platform for investing in the US stock market, has almost doubled investors during the lockdown.

2. Diversify. Diversifying is spreading your investments over a number of investment classes.

Have a portfolio with mixed assets, like stocks, bonds, deposits, index funds, and managed funds from different industries such as health, pharma, property, and gold. This helps minimise risk and offers a safeguard against ever-changing market dynamics.

The pandemic is affecting industries differently, so it would be a wise strategy to think about the impact Covid-19 has on various businesses before buying stocks of a particular company.

For investors with limited financial knowledge, instead of buying stocks, a good option is an index fund or managed funds.

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Having managed funds and Exchange Traded Funds (ETFs) of various assets minimises your risk and offers a good return on investment.

With Covid-19, investor confidence was a bit shaken due to market uncertainty and not knowing what the future holds, but it seems it has been quickly restored and investing has increased in the financial markets.

In 2020, New Zealanders have higher confidence in managed funds than the stocks they bought themselves, similar to 2019.

In 2020, eight out of 10 people have investments in either KiwiSaver, which is by far the most preferred form of investment, followed by term deposits or another form of investment.

3. Asset allocation. Asset allocation creates a balance between risk and reward to an investor.

Choose an investment product for your risk profile, how long before you need your money, your age and financial goals.

Shares are suitable for helping you reach long-term financial goals because they generate high returns – but they’re considered risky.

Debt instruments with reasonable returns add stability to the portfolio, buffering you against price changes in the stock market.

Some of the common debt instruments are debt security, government bonds, company bonds, and fixed deposits.

These are less prone to market fluctuations than equity investments such as shares, managed funds, and Exchange Traded Funds (ETFs), where the returns are more influenced by changes in the stock markets.

With easy trading and investing platforms available in New Zealand, such as Sharesies, Smart Shares, Hatch, and ASB Securities, Kiwis can choose various debt and equity instruments, depending on their risk appetite and financial goals.

KiwiSaver is still our most popular form of investment and three out of 10 New Zealanders have KiwiSaver as their only form of investment.

bonds has increased, from 3 per cent in 2019 to 6 per cent in 2020.

Good returns and ease of investment were some of the main reasons investors chose a particular form of investing platform.

An investor should have a reserve fund with least three to six months’ worth of expenses in liquid savings account to ensure it is available at a short notice.

An investor might not lose money in the current scenario, but it’s prudent to have an emergency fund and feel secure before taking any risks.

Warren Buffett, self-made billionaire and CEO of Berkshire Hathaway says, “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

5. Review your portfolio. In this era of globalisation, an event happening in any part of the world has an impact on your local financial market.

It’s always advisable to monitor your portfolio from time to time and make necessary changes.

Check in with your financial planners or advisers. They can help you to review your portfolio and work out which assets are best suited to your own risk profile.

Investing in government and corporate

6. Rules of investing. There are no golden

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•

Rule of Debt-Equity in a portfolio.

Investors should hold stock equal to 100 minus their age. Say, for example, a 55-year-old person would have 45 per cent of their investments in the equity market and 55 per cent in debt instruments like bonds and government instruments.

•

Rule of 10,5,3. An investor should expect around 10 per cent return from stocks, 5 per cent from bonds and 3 per cent from liquid cash and cash-like accounts.

•

Rule of 72. This rule estimates how long it will take to double your money.

For example, under the rule of 72, if the interest rate is 8 per cent, then your money will double in nine years (72 divided by 9 equals 8).

•

Rule of 114. This works out how long it takes to triple your money. Divide 114 by the interest rate to know how many years it would take for the money to triple.

4. Emergency fund. At this time, more than ever, before taking on risk in a volatile market, it’s always wise to start with an ‘emergency fund’ and then invest what’s left over in financial markets.

Term deposits are our second most preferred investment. We’ve seen a big increase in peer-to-peer lending, doubling to 4 per cent in 2020 from 2019.

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rules when it comes to investing. But this is a good time to restate some of the basic rules:

The big picture We’re stuck in uncertain times where it’s difficult to predict what the markets hold for investors.

However, financial markets have always delivered good returns from a long-term perspective.

Keeping the big financial picture in mind, it would be wise to have a disciplined investment approach and continue investing across various asset classes, to reduce the impact of market turbulence.

ADVERTORIAL

Pay The Right Way To Suit Your Needs It’s not widely known that there are two ways to pay for life cover, says Asteron Life’s Head of Life, Grant Willis. Choose the way to pay that suits your timeframe and your need.

You also want to get the cover you need in the most cost-effective way.

So, it’s a good idea to make sure that you’ve structured your premiums in a way that suits you.

There are two premium structures commonly used in the insurance world – ‘level’ premiums and ‘stepped’ premiums.

Here’s a guide to the difference between the two ways of paying.

Level premiums Level premiums may start out higher, but your premiums are locked in, so they won’t increase as you get older, unless you change your cover.

At first glance, it might seem like level premiums are the obvious choice. But, in fact, both structures have different benefits to suit different people.

Level premiums might suit you better if you need to keep your insurance for a long time, or you need certainty in your budget.

With level premiums, you’ll always know what you’re paying, over the time you have the policy.

Stepped premiums Stepped premiums may start lower,

www.asteronlife.co.nz

but they’ll increase each year, based on your age.

Sometimes stepped premiums may take a while to increase, so if you don’t need to keep up your insurance for a long time, or your need for insurance might reduce, they might be a better option.

You might want cover while your kids are young, or at that start of your mortgage, to protect your partner and make sure the kids get a good education if the worst happens.

But by the time your premiums start to rise steeply, you might need less cover, because you’ve paid off your home loan, or your kids have grown up and are living independently.

If you want to check what premium structure you have, change your structure, or see what each premium type would look like for you, have a chat to your financial adviser.

If you don’t have an adviser, your insurance company can help you find one. For more information about Asteron Life policies and payment options, go to www.asteronlife.co.nz.

Level vs Stepped Level premium Stepped premium

Choose the one for you – or a mix The important thing is to choose what’s right for you, whether that’s stepped, level or a combination. For example, the best solution for you might be to put half of your life insurance on stepped premiums and half on level.

It’s not always easy to figure out, but a financial adviser will be able to assess your needs and budget, show you how your personal premiums will change over time, and help you choose a structure – or a combination of both – that suits you.

When you take out life insurance, it’s usually because you want to protect the lifestyle you’ve worked hard to create, and it’s important that you can keep up your cover for as long as you need it.

$$ Monthly premium

When you take out a new life insurance policy, you need to be confident that you can afford the cover for as long as you need it.

$

Age (indicative) A level premium starts higher but over time it could save you thousands.

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Man / Machine What does the future wealth adviser look like? Maybe it’s not even a person. Rachel Strevens speculates on how robo-advice will change our lives.

Kiwis are living longer than ever before, with the average life expectancy up from 69 years in 1950, to just over 82 this year.

Medical advances, lifestyle changes, and technological innovations mean people are living longer. The global population has risen dramatically.

Because of this shift in population demographics, financial advice is more necessary than ever before.

As the population continues to grow and age, investors will turn to advice to get more comfortable with their financial situations and to get support for the own investment and retirement goals.

So how can advisers meet the needs of modern investors on a large scale, while ensuring that their fees are accessible for the average Kiwi?

It’s simple – they should start embracing emerging technology to future-proof advice.

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Digitising advice A growing group of mass-market investors offers a huge opportunity for advisers to reach more customers and improve market share.

To be successful, they need to embrace the idea of digitising their knowledge, to make it easily accessible to a wider audience.

We’ll see artificial intelligence (AI) and intelligent workflows leading to more automation – and the emergence of client self-service technology, which is essential for advisers to help their clients at low cost and on a large scale.

Women billionaires At the other end of the scale, emerging high-net-worth individuals are more diverse and demanding than previous generations, and we’re seeing a significant rise in women billionaires.

By the end of 2020, it’s estimated that women will control approximately US$72

trillion, which equates to 32 per cent of global wealth.

Having grown up with technology, wealthy investors expect to have the same level of personalisation and unlimited access to information with their advisers that they have with their other online services.

Technology that delivers speed and efficiency will play a key part in keeping these people engaged.

We’ll see data analytics being combined with artificial intelligence-powered tools, such as interactive client portals.

These will help advisers deliver personalised communication, transparency, and the tailored products these people demand.

Advisers always ‘on’ Thanks to Covid-19, advisers have already had to turn to digital and video approaches rather than face-to-face meetings.

ADVERTORIAL

Companies can no longer afford to dictate how customers can access their information.

As trust in AI grows and advisers adopt a more hybrid approach, we’ll start to see it playing a key role in advice.

Wealth advisers need to make themselves readily accessible across a number of platforms, both physical and digital, so they can offer their clients services in a manner that suits the investor best.

AI is a key strategy for business growth, from intelligent customer prompts and ‘chat bots’ that pop up to interact with clients online, through to a digital advice process done completely online.

We’ll see digital offerings working handin-hand with the option for human access, to help improve how advisers are accessed and their transparency.

There’s no question that technology will do most of the administrative heavy lifting in the future.

What makes this 24/7 service possible are automated workflows and intelligent AI-powered tools.

Invsta’s latest report, “Is your business ready?”, shows that robo-advice is fast becoming an essential tool to help advisers reach investors.

Robo-advice or, as I prefer to call it, digital advice, lets advisers offer customised advice to a mass audience across many platforms while keeping costs low.

Advisers become mentors

As tasks and manual processes get replaced, I predict that advisers will have a more educational role and coach their customers to achieve financial wellbeing.

They’ll help customers identify what matters most to them and use data analytics and behavioural information to keep them on track.

Clients will start to play an active role in managing how their own investments

are administered through self-service portals, such as online investment.

Because of this, advisers will need to adapt their services to stay relevant for the next generation.

This explosion of technology is a great chance for wealth advisers to adapt to match shifting customer dynamics and market influences.

We all need investment advice – and particularly coaching – more than ever, because the next generation of investors is navigating a post-pandemic world at the same time as they’re seeking information to improve their financial wellbeing.

The new battlegrounds for success will be accessibility, transparency both in information and fees, and support that centres around the client.

If you’re a professional adviser, take a look at the Invsta wealth adviser solution on www.invsta.com for ways to help enhance your firm’s advice experience.

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S E X & TA

PERSONAL FINANCE

The Millennial Debt Monster Over the Covid pandemic, we’ve racked up eye-watering amounts of debt. Bernard Hickey peeks at the monster under the bed for the next generations of Kiwis.

Millennials are afraid. They’re reluctant to take out a credit card and can’t imagine owing more five times their income on a house.

It’s understandable. Our government has borrowed almost a billion dollars a week since the first lockdown for wage subsidies and benefits.

It’s sparking debate about a NZ$200 billion ‘Debt Monster’ being created for future generations to repay.

The Government’s forecast to borrow the equivalent of NZ$40,000 for every man, woman, and child over the next five years.

This is ‘unsustainable and dangerous’, we’ve been told by both political parties.

Will we destroy NZ Inc? Over the past 30 years, we’ve been warned that being irresponsible with our nation’s money would earn the wrath of foreign investors and destroy New Zealand Inc. Ratings agencies would downgrade us, and bond fund managers would lock us out of international financial markets, forcing our interest rates sky-high and destroying our currency.

We’ve been taught that fast-rising government debt’s bad and best avoided; that our government must be careful not to spend more than it earns; or crushing debts will push up taxes.

We’ve been told we risk becoming the next Argentina if we don’t get our budget back

into surplus pronto and start repaying the debt. Loudly.

Both parties have committed to reducing net debt to under 20 per cent of gross domestic product (GDP) for the past 30 years.

The assumption is that this is a healthy level of debt that allows a bond market to function but gives New Zealand the freedom to not have to worry about bond vigilantes.

Debt to GDP will double Yet, the government’s now forecasting net debt will rise to 56 per cent of GDP over the next five years. How could New Zealand possibly cope with more than doubling its debt-to-GDP ratio in just five years?

Should we be bracing for double-digit interest rates, a plunging dollar, tax hikes, and spending cuts?

The short and long answers are both no.

We know we don’t need to be afraid, because that’s what global bond investors are telling us through the prices and yields they’re willing to pay for New Zealand government bonds.

The bonds have spoken Global bond markets are a great way to see how investors rate a country’s finances.

The price or yield they pay whenever a government issues a bond is like seeing the ‘wisdom of the crowds’ up in lights.

It’s the reason Italians, Spaniards and Greeks knew the bond vigilantes were

revolting, when their government bond yields blew out. Prime ministers and governments rose and fell whenever those yields passed certain thresholds.

So, what does the world think of how New Zealand’s debt is shaping up?

Surely the bond vigilantes are revolting.

That’s why Jacinda Ardern refused to put up benefits by NZ$5 billion a year, as her own officials recommended, and why the Labour Government’s not planning to increase its state house-building programme beyond the current 8000 by 2024.

“It’s just not viable,” she said, three weeks before the election. She was worried the bond vigilantes would revolt.

But, where’s the revolt?

There’s one simple way to check: just look at the price and yield of bonds in most New Zealand government bond auctions.

Negative yields are a hot ticket Yields fall when prices of fixed interest securities or bonds rise.

In the first week of October, the Debt Management Office of the Treasury sold NZ$450 million worth of four-year bonds for an astonishing negative yield of [rubs his glasses to check the number] minus 0.048 per cent.

That means some bond fund manager in Auckland or Sydney or New York or Zurich was willing to PAY Grant Robertson and Jacinda Ardern NZ$48,000 for the privilege SUMMER 2020

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of lending the government of New Zealand NZ$1 million for four years.

They weren’t even expecting a return over those four years for locking up that money in the Treasury of New Zealand. They were so confident of being repaid, they were happy with a negative interest rate.

A vote of confidence That’s not a revolt. That’s as massive a vote of approval and congratulations as any masters of the universe could give. There were bids of NZ$3 million for each NZ$1 million of the bonds offered.

So, why is the Green Debt Monster always hanging around in the background? Why are our politicians so afraid?

Unlike in Robert Muldoon’s time, when rising inflation and interest rates meant we couldn’t afford to service our foreign currency debts, our debts are much easier and less risky to service.

That’s even more the case when the Treasury can issue bonds that don’t have to be repaid for 15 or 20 years. In October, it issued NZ$150 million worth of bonds maturing in 2037 at an interest

rate of – wait for it – 0.908 per cent.

This is all possible because New Zealand’s forecast debt-to-GDP ratio will be less than half that of our peers’ debts, and less than a third of levels forecast for other OECD countries by the middle of the century.

They’re giving us money That means that fund managers around the world are selling their own country’s bonds to the US Federal Reserve, the European Central Bank, and the Bank of Japan in exchange for freshly printed money.

They’re then trying to put that money into New Zealand’s coffers.

The trouble for them right now is they’re having to compete against our own Reserve Bank, which has pledged to print NZ$100 billion over the next three years to buy the same bonds.

There’s now a huge opportunity for the government to use that freshly printed money being serviced with nearly zero or below-zero interest rates.

We could spend on our youth It could build housing, education, and

health infrastructure for Kiwi young people, so they can become more productive, healthier, and happier.

I would say now’s the time to borrow much, much more for very long periods, and to invest in youth.

That’s the exact opposite of what politicians are telling us to do, and exactly what the ‘wisdom of crowds’ is telling us to do.

The so-called ‘debt blowout’ worrying the young should actually be seen as the opportunity of a lifetime, rather than the monster under the bed.

Definitions: Bond: A bond is a fixed-income investment where an investor loans money to a body (typically councils or the government) over a set timeframe for an interest rate.

Gross domestic product (GDP): GDP is a measure of a country’s market value. It covers all goods and services produced within a set timeframe and can be used to compare nations.

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PERSONAL FINANCE

For Richer or Poorer Compound interest can get you rich faster.

But it can also get you into debt faster.

Way, way faster. Paul Gregory explains the power of the maths.

What is compound interest and why is it so great?

‘Compounding’ is re-investing the money you earn on investments – your return – instead of spending it.

When you re-invest your return, your pool of money increases. With more money invested, the impact of any returns you get is bigger: a 5 per cent return on $10 is 50 cents, but a 5 per cent return on $10,000 is $500.

The return rate is the same but, applied to a far larger sum, your financial benefit is much greater.

The longer you’re disciplined about re-investing returns, rather than spending them, the more powerful the compounding – or ‘snowballing’ – effect.

Here’s a simple example of how compounding works.

Say you have $100 and get a 5 per cent return a year for two years, but don’t reinvest the return. After the two years you have $110 – the $100 you started with, plus $5 for each of the two years you were invested.

If you reinvest the return, you have $110.25. Why? Because at the end of first year you have $105 invested, not $100 like in the first example, because you reinvested the $5 interest rather than spending it. A 5 per cent return on $105 is $5.25.

An extra 25 cents might not seem like much, but extend that difference over time and it will add up to a far greater amount, quite quickly.

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For Richer

Value of investment

Investment at 5%

Total interest earned

$1,628

Total Value

$1,466

$1,000

$488

$0 1

2

3

4

5

6

7

Yearly

The returns you get on it, because of its size, will eventually be larger – perhaps far larger – than the contributions you’ve made.

Note that the rule is usually accurate, as long as the return rate you use is less than 20 per cent.

Do this: •

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Take the return on your investment. This might

10

be fixed on a term deposit or a bond, or a reasonable expected return on shares (which is not guaranteed). Let’s use the expected return on a KiwiSaver Growth Fund over time, 4.5 per cent annually, from the regulations governing KiwiSaver calculators.

The returns you get on it, because of its size, will eventually be larger – perhaps far larger – than the contributions you’ve made.

Try an exercise, called ‘The rule of 72’, which is a quick way to estimate how long it will take to double your money – an idea anyone can understand! – through compounding.

9

*Assumes all returns reinvested

If you’re disciplined about reinvesting returns, your investment will, over time, build to a size where it gains its own momentum.

If you’re disciplined about regular contributions, too, this effect can be even more rapid.

8

•

Divide 72 by the interest rate.

•

With a 4.5 per cent annual return, you’d expect to double your money in 16 years if you reinvest your returns.

While 16 years might sound like a long time, a lot of investment goals are long-term.

Retirement can be many decades in the future, depending on your age. Even a first home for a teenager, or someone in their early 20s, is fifteen to twenty years away.

PERSONAL FINANCE

For Poorer

Value of investment

Credit card at 20%

Total interest earned

$6,192

Total Value

$5,572

$3,715

$1,000

$0 1

2

3

4

5

6

7

Yearly Because the interest rate is higher than the expected return on a KiwiSaver Growth Fund, the debt grows much faster than the investment.

Unfortunately, compound interest also works against you, with debt, just as fast, or even faster.

Let’s use credit cards as an example. If you don’t pay off your credit card 100 per cent within the interest-free period, interest is charged on what’s left, boosting the size of the debt.

If you fail to pay off the full debt the next month, interest is charged on the debt you incurred, plus the previous month’s interest.

And so on.

Compounding is especially bad with credit-card debt because the interest rate is typically very high – 20 per cent or more.

Let’s return to the rule of 72 to show how it works.

8

9

10

* Assumes no payments made

Let’s say you have a no-frills credit card (no Fly Buys, no travel insurance) charging a lower rate of interest, like 15 per cent. If you don’t pay off your debt, the rule of 72 applies: •

15 per cent

•

Divided by 72

•

The debt doubles in less than five years.

Because the interest rate is higher than the expected return on a KiwiSaver Growth Fund, the debt grows much faster than the investment.

And while returns are not guaranteed on any investment, you will ALWAYS be charged the interest rate on debt.

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If you’ve had the experience of paying a lot of interest on credit card or other debt and want to avoid it, why not invest the money you’re thinking of adding to your credit-card bill?

Ways to use compounding interest In the example above, we used a KiwiSaver Growth Fund and said the return was not guaranteed.

Some investors might prefer something with less risk, but still want or need the potential for a higher return. You might consider: •

Investing in something with lower risk, like term deposits or bonds. While the return is likely to be modest (perhaps very modest now), you will get that return. Let’s say you get 2 per cent.

•

Rather than reinvesting in the lower-risk investment, you take out the earned money and invest it in something with a higher expected return, such as shares, and reinvest there, too.

•

That way you still have a sum – perhaps quite a large one – in a lower-risk investment, but you are also investing (and compounding) in a higher-risk investment with a larger potential return.

If you’ve had the experience of paying a lot of interest on credit card or other debt and want to avoid it, why not invest the money you’re thinking of adding to your creditcard bill?

That way you avoid the risk of bad compound interest and increase your chances of benefiting from good compound interest!

Paul Gregory is the Head of Investments at Pie Funds.

Charts See for yourself how compounding works.

The Ontario Securities Commission – a Canada-based equivalent for our own Financial Markets Authority – has a welldesigned, simply explained compound interest calculator on its website. Change the investment amount, the size and frequency of your ongoing contributions, the interest rate you receive and the period of your investment. Try it out at: www.getsmarteraboutmoney.ca/ calculators/compound-interest-calculator/

We also talked about debt.

Money doesn't grow on trees, but it does at PMG.

PMG’s Reinvestment Plan provides PMG investors with:

P 0800 219 476 pmgfunds.co.nz

Compounding returns – an advantageous and convenient way for investors to automatically increase their investments, easily.

Investing small amounts often, in quality NZ commercial property with PMG. An opportunity to invest the net proceeds of cash distributions, from existing investments managed by PMG, into fully paid units in the PMG Generation Fund.

Invested capital and passive income works even harder.

‘I didn’t know how to cut hair, but I bought two barbershops’ David Osborne discovered he had the right skills to own and run two thriving barber businesses.

David Osborne says when he was made redundant from his retail role at a high-end jeweller, he had two choices.

“I could say, ‘Woe is me, look what’s happened!’ and retract.

“But instead I thought, ‘I’m looking for businesses, anyway. Now’s the time to see what else there is’.”

His wife had a contact at ABC Business Sales who let her know there was an opportunity to buy two franchises for The Barbershop Company.

“My first impression was, it’s a barber shop!

I’ve got no idea what this is all about.

“But the more I looked into it, the more I thought I had the skill set to be able to do this.”

Not confident to go it alone Osborne doesn’t cut hair, because he has expert barbers in two teams across his Milford and Takapuna stores in Auckland.

“From my side of things, it’s just the running of the business and making sure that people have a fantastic experience.”

Over his 10-year career managing retail jewellery stores, he says he’s dealt with people spending from $50 to more than $100,000.

“I suppose the biggest thing is having people walk out feeling they’d had the best possible experience, whatever the dollar amount is.

“I could see that’s what The Barbershop Company was looking at doing with its business model.”

He’d been looking at buying a business for about a year.

“I wasn’t confident that I could throw myself into a business 100 per cent by myself without some help, but a lot of the accounting and the financials are taken off my hands by the head office.

“They don’t want us to have the owner’s head stuck in paperwork, which you could easily do if you’re out back all day.

“Really, where you’re going to make the change is out front meeting and greeting, and getting to know your community, talking to people, rather than behind the scenes.

Part of a trend ABC Business Sales Managing Director Chris Small says many people are pivoting in their careers and it’s entrepreneurs like Osborne who will land on their feet.

“As David shows, you don’t necessarily need to have the actual skillset of the trade for the business you’re considering,” says Small.

Osborne says he can see the value of barbershops. Women think nothing of spending half a day in a salon, but guys don’t get a lot of pampering.

“It’s about being able to make somebody feel special; somebody sits down, and you give them an experience.”

But he’s the first to admit he can’t cut hair, as his eight-year-old son Marshall found out.

“One of the guys here had a mohawk, so Marshall came in here and got a mohawk.

He wanted the same again, so I said, ‘I can’t guarantee anything, but let me have a go’.”

“It was awful. He started laughing and then he said: ‘I can’t leave the house!’

“So, he put on a baseball hat and we went straight to the barbershop.

“Thankfully, he took it the right way!”

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‘We decided to branch out into forestry’ Darcy Webber and his wife Ashleigh went looking for other assets to add to their share portfolio.

Tauranga self-employed fisheries consultant Darcy Webber and his wife, Ashleigh, had been investing in the share market for a couple of years when they decided they wanted a change.

Webber says he was keen to diversify into other areas, but he wasn’t exactly excited by the returns he could get for bank term deposits.

“Basically, I’m just saving for retirement, but I don’t want to leave any money in the bank because things are pretty slow now.”

He says he searched for alternatives online. “I’m trying to learn as I go. I finally stumbled across the forestry blocks that we ended up investing in. We bought shares in two different blocks with Forest Enterprises.”

He had a couple of friends working in the industry, so he ran the idea past them.

“Forestry seemed to be one of the few things that are returning well.

“It seems to me that it’s still having reasonable returns on investment, around the 8 per cent per year mark.

are trying to offload. They keep popping up online.”

harvested of around $1000 per 200 shares for the ongoing costs of the forests.

His first two investments are both in the lower North Island, the Wairarapa Group Investment, and the Ngatawhai Investment, which mature between 2038 and 2046.

With these investments already in his portfolio, Webber says he’s now looking at buying into blocks that will be maturing in the next five years.

“Everything else is just sort of trucking along lately, unless you get into more risky ventures – but I’m not really willing to do that.”

The Wairarapa Group Forest Investment is 970 net stocked hectares of high-quality forestry, across three geographically separate second-rotation forest properties in the Wairarapa.

After investing in 200 shares in each of two new blocks, he realised having different maturity dates would spread his risk further, so he went looking again.

The Ngatawhai Group Forest Investment is a single forest property in Wairarapa, with 627 net stocked hectares of second-rotation pine forest, native bush, and wetland.

“I’m actually trying to purchase more – to buy the forestry shares that other people

Webber has bought 200 shares of each, and he’ll pay annual contributions until they’re

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He’s aware there are risks in forestry, of fire, disease and market conditions changing.

“I’m pretty comfortable with those risks.

They’re different maturities and different blocks, which spreads the risk as well.

“I don’t want to put all my eggs in one basket, that’s for sure.”

He says he’s excited to check out his new investment in person.

“If they have an open day, I’d quite like to go along and have a look.”

‘I decided to try out peer-to-peer lending’ Ex-pilot Tom Enright, 83, turned to a modern investment for higher returns.

When downsizing his family home, Tom Enright was left with a stash of extra money to invest.

“I had cash flow from my flying career and from the sale of my Remuera house that I was looking for a home for.

“But I wasn’t very happy with what the banks were offering,” he says.

He started looking for ways to make his money work harder.

The traditional institutions were his first thought, but he says the 2 per cent interest on a term deposit at the time wouldn’t offer him the retirement income he was looking for.

Then he found an investment that’s relatively new in New Zealand.

Enright’s son, lawyer Robert Enright, suggested he add peer-to-peer lending to his investment portfolio with Zagga.

Now Enright has had two years of what he considers to be high returns and easy investing.

Now the savvy grandfather of nine has funded many Zagga investments, and the rest is history.

Zagga is an online platform that matches investors to borrowers, using their property as security. Usually those borrowers have a good credit history, but for some reason don’t qualify for bank lending criteria.

Some may have irregular incomes from running their own businesses, some are developers in need of funding for projects, others are investors needing money more quickly than banks can respond.

Investors like Enright fund loans in full or in increments of $1000, after seeing the

details of the loan, the borrower, what the money’s for, the borrower’s equity in their security property, and their credit rating.

“My view remains that there are two cardinal points to watch for in investing,” says Enright.

“One is the integrity of the people you’re dealing with… at Zagga, people know what they’re doing and are completely above board.

“The second thing is, of course, to ensure that one does have adequate security, and that means a decent loan-to-value ratio.”

Enright’s Zagga investments are secured by mortgages on real property, the same as what banks use, which he’s actually gone and seen.

They’ve all been paid back on time, too.

His first investment of $542,000 funding a

residential remortgage in Auckland earned him a net return of 7.84 per cent.

His second, smaller investment also earns over 7 per cent interest – a noticeable stepup from his previous investment elsewhere, which earned him only 3 per cent.

Enright recently remarried and has published a book on his flying career, Many a Close Run Thing. He says peer-topeer lending hasn’t compromised his core beliefs. In fact, it’s helped strengthen them.

“I don’t regard myself as a guru, but I live by the old-fashioned rules… have a variety of investments in case one goes wrong.

“There’s always someone ready to say the stock market’s about to collapse,” he says.

“I would say don’t put all your eggs in one basket, but I find Zagga is a good one for a proportion of my money.”

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YO U R I N V E S T I N G

‘I read about property investing.

I thought, I can do this!’

Ilse Wolfe started investing at 23.

Now she owns NZ$11m worth of rental properties.

When Ilse Wolfe was a little girl, she used to phone 0800 numbers to ask for brochures for James Hardie and Gib. She spent hours looking at their products and then integrating them into floorplans she mocked up by hand.

Now this inspirational woman’s passion for architecture and design has led her to a fulltime job buying rental properties, renovating them, and renting them out.

Wolfe started investing when she realised getting a salary wasn’t the fastest way to wealth.

“I started my first graduate role at Microsoft and the first realisation I had after a couple of monthly salary cheques was that it only lasted two of the four weeks. I was frustrated that I was working so hard and it just didn’t seem the right formula.

“I thought, there has to be a better way.”

In her next role at Westpac, as an analyst, she worked with top businesses in the Waikato, many with property investments.

“I couldn’t believe how quickly the equity built within my clients’ portfolios every quarter when I reviewed their performance.

This was the beat I realised I was missing.

“After I showed an interest, an accounting client director kindly took me through a property tax profit and loss statement. I saw the benefits and was enraptured instantly. I don’t know if he realises to this day how he changed my outlook on life.”

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Some clients had more than 20 rentals. “I was so amazed by how these numbers were increasing from these properties. I decided I really wanted to get into this, to give it a go.”

“I hadn’t been exposed to investing. And I realised then that the rich invest and the poor save.”

At 23, within a year she’d bought two home-and-income properties, the first with NZ$18,000 deposit for a 95 per cent loan.

“That was in 2007, at the peak, just preGFC, when Westpac was giving out 100 per cent loans. It was exciting, but being a young woman had its own challenges.

“I found that trying to manage those properties directly didn’t work. My very

first tenant took over both the main house and the ancillary dwelling for his teenaged daughter, but he stopped paying rent.

“The middle-aged tenant in arrears wasn’t intimidated by me, so I fell to the bottom of his long list of creditors. He really took advantage of me and ended up about $5000 in arrears.”

Wolfe finally discovered she could take him to the tenancy tribunal, where she got back her NZ$5000 – at NZ$100 a fortnight for a couple of years.

“As a young investor, that set me back. I knew that from then on, I needed to hire the professionals and make some changes to do it properly.”

PERSONAL FINANCE

The catalyst for her deciding to go fulltime into property investing was a tragedy in the family.

She and her partner, Taylor Green, were working overseas in 2015 when her mother passed away unexpectedly.

“I had a crisis. I had seen that my mum had just turned 60 and worked Monday to Friday, then died on Sunday. I just thought that’s not a fair life. It was a real eye-opener for me. I just didn’t have the heart to go and work for someone and give them all my time.

“I picked up an investing magazine and there was a ‘flip’ case study with a P&L [profit and loss statement]. I read it and thought, I love project managing, I can do this!

“I showed Taylor and said, I’d love to give this a go.”

To get started, Wolfe leveraged her properties to buy another, and Green sold a half-share in a property he owned with his sister to pay for the renovations.

“That enabled me to work fulltime on the properties in 2015.

“It was a huge step for me to move away from a global brand director salary into an industry which, in hindsight, I had almost zero experience in.

and NZ$100,000 passive income a year, through renovations.

“I need to be able to add immediate, significant value. Every dollar I put in; I expect to get back at least NZ$4.”

For a lifetime goal, the pair worked out what they wanted out of life. They liked Tony Robbins’ advice that to live the life you want doesn’t require ownership, but access to whatever you want.

Their best life “We worked out the all-encompassing cost of our best life and worked backwards to how much annual income we would need to provide it for our family.

“Knowing the annual income we needed, we could calculate the value of freehold assets we needed to generate that much money.

“Our goal is NZ$40 million of freehold assets producing at least 5 per cent of income.” That’s NZ$2 million a year to live on.

Rather than selling properties to repay debt, the pair invest in forestry.

“Forestry assets are our repayment plan.

I have a proven formula for how many hectares of forest will repay each million dollars of property debt.

“Investing the NZ$120,000 deposit into our first renovation was terrifying. But I did everything I could to mitigate the risk.

“The forestry matures 10 years ahead of the mortgages and gives us an ideal timeframe to monitor market pricing for a while.”

“I calculated the first renovation to the cent by photographing price-tags of any item I planned to use, input every item into a spreadsheet, and then scoured retail websites to ensure I had my budget close to 100 per cent correct.”

The couple have a toddler – and a baby on the way – so they’re looking forward to a future where they’re free to enjoy family life. Their ultimate goal is FIRE – financial independence, retire early – and that goal’s in sight.

She’s now been a fulltime investor for five years.

Wolfe has multiple income streams now, including a salary, an e-commerce business, Aglow Organics collagen and superfoods, but she also has the freedom to rely on passive property income.

“Rather than talk with investors about number of properties, I find it far more useful to discuss portfolio value, net worth and yield as core measures. And more importantly, cash-on-cash return.

“In terms of our portfolio, we’re over the NZ$11 million mark now.”

“The goal is to have our entire lifestyle covered by property income, so that we can live a full-time, world education for our family through travel and experience.

Her strategy is ‘BRRR’: Buy, Renovate, Rent, Refinance, Repeat. She’ll only invest in properties offering more than a 14 per cent yield, within two hours of Auckland.

“I’m in full control of my diary now, so I guess you could say that it is semiretirement, but because I love property, I don’t see it as work.

She’s buying three or four properties a year, investing 10 per cent of their value into the renovations. She aims to add about 40 to 50 per cent to a property’s value by renovating.

“I want us to be able to provide that freedom for Taylor by time he’s 40. Then we’ll have 100 per cent control over our time.

“On top of the asset gain from buying the houses, our goals are to manufacture an additional million dollars of equity

In the meantime, Wolfe likes to help aspiring investors get into the market.

She’d like to formalise that by doing property coaching, particularly for women.

Wolfe’s Tips Add value.

“The key areas I would invest in are creating an additional bedroom within the footprint, and a new kitchen and bathroom, because every potential tenant walking in sees the immediate impact of a great new kitchen and some cosmetic touches.”

Take a fresh approach.

“I try to zig when people zag. I ask other investors how they’re searching and then do the opposite.”

Be the weakest link in your investor circle.

“Find a mentor, network and become friends with people you want to be like.

Surround yourself with those more established than you are, but always have value to contribute.”

Know your numbers – and your goal.

“Every investor should know their numbers inside and out, how each potential new deal is going to get them to the end goal. Each purchase should be driving you towards that big picture.

If it doesn’t, it doesn’t fit.”

Review your balance sheet every year.

“Cull your most unproductive asset to reinvest more efficiently.” For example, she sold one property and used the same deposit to buy two multiincome sites that generate four times the income: this same deposit is still actively rolling forward now into further purchases.

Pay the professionals.

“I find my most important allies are my property managers. Through strong relationships, they now innately know my position on matters such as maintenance, so I give them the autonomy to make decisions on my behalf. This lets me focus on renovations and project management.”

Think walks.

“I walk daily to both clear my head and to focus on a particular challenge. This has solved many financial matters for me, including giving me the clarity to make the many incremental changes we needed to move from a negatively geared portfolio to a profit-making one.”

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YO U R I N V E S T I N G

1.

See You Later, Procrastinator Procrastination can be a slow boat to financial ruin, says Naomi Ballantyne of Partners Life.

3.

Congratulations, you’re now an adult with an income that allows you to meet your responsibilities and afford your lifestyle.

2.

You’ve built a life and now you’re carrying your family’s life on your shoulders. It feels good to know you’re providing them what’s needed.

T S OP!

Being needed comes with a niggling fear. What could happen if you can’t earn that income any more?

Who could take over from you as the shoulders on which your family’s lifestyle’s built?

5.

4.

You should get insurance, so you can still get an income, even if you get sick and can’t earn for a while – it’s the adult thing to do, right?

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Right now is always the right time.

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How else are you going to replace your income if you can’t earn it?

Get life right with Partners Life.

If you want to buy insurance from Partners Life, contact a financial adviser or insurance broker near you.

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YO U R I N V E S T I N G

Where Should You Retire?

Have you always dreamed of moving to a house by the sea, or are you happy staying where you are?

Diana Clement looks at where’s cheapest, what you’ll need – and we rate popular Kiwi retirement spots.

Which house?

Choosing where to retire is a very personal decision.

Some of us want to be close to family, or even move in with them. For others, that idea’s a nightmare.

Some find that downsizing to the provinces releases capital.

You may dream of the retirement village social life, bowls on the green, and Friday happy hours. Or you like the idea of a far-flung retirement overseas.

Meanwhile, some retirees are quite happy to rattle around the family home and welcome the grandkids for visits.

Love where you live? If you’ve paid off your mortgage, staying in your family home works for some retirees and their whānau. It also makes living costs cheaper.

It’s possible your house’s value will go up, which is a real plus, but remember that costs such as rates and insurance can add up.

If money’s an issue, you can get a reverse mortgage and use it for living or renovations. It can release capital that doesn’t have to be paid back until you move or die.

Downsizing is another way to turn your home into cash.

If that downsize includes moving to the provinces, you’ll most likely release even more money to fund your retirement.

If retirement village life suits, you can buy a ‘right to occupy’ lease from around NZ$200,000 to NZ$1.5 million.

You’ll pay a weekly fee, which can range from around NZ$90 up to or even more than your full NZ Super payment.

Renting takes away the worries of maintaining a house. On the other hand, your home could be sold from under you, or the rent could rise sky-high. If your income is truly low, then you might qualify for a state or council flat.

Grey Power’s Bill Rayner has considered all his options. He still lives in an older home, but he’s seen several local members move into a brand-new Ryman Healthcare retirement village in his area.

www.heartland.co.nz

PERSONAL FINANCE

Great places to retire When choosing where to retire, older people are looking for a different lifestyle to younger, child-free couples or families.

Suddenly other factors start to matter, like long-term costs, rates, sunny weather, crime statistics, access to healthcare, big-city amenities, and the number of over-65s in the area.

Grey Power’s Bill Rayner warns retirees to consider their social life before moving.

Originally from Opotiki, Rayner considered retiring to Wairoa, but found the blokes in the local pub only talked about farming, a subject he was no longer interested in.

In its latest New Zealand Retirement Expenditure Guidelines, Massey University’s Fin-Ed Centre found a couple would spend on average NZ$1436 a week in a metropolitan areas for a “choices” lifestyle, compared to the much lower $1135.70 in the provinces.

On a ‘no-frills’ budget, that came to $898 for cities and $639 for the regions.

Rayner says some smaller towns and suburbs are popular retirement hubs. For example, the Orewa/Hibiscus Coast area just north of Auckland, Mt Maunganui, Blenheim, and Marlborough all have thriving clubs for senior citizens, but groups like this struggle to survive in many areas.

Top 10 Kiwi towns We ran a comparison of Kiwi towns and rated them on how attractive they are to retirees, based on climate, crime, availability of health services, housing affordability, and the cost of living.

Some of the winners we predicted, but others were a surprise, shooting to the top 10 for different reasons.

Here are the top 10:

Whangarei Thames

Rotorua

Whakatane/Ohope Gisborne

New Plymouth

Napier-Hastings Nelson

Masterton Blenheim

YO U R I N V E S T I N G

What’s important to you?

Consider what’s important to you. Do you want to be surrounded by chickens on a lifestyle block, or within walking (or electric bike) range of parks, beaches, supermarkets, banks, cafés, and entertainment?

Do think about what happens when you’re 80 or 90. That move to Rotorua for the mountainbiking and great outdoors life may no longer work.

Would a gap year work?

Sometimes it’s worth renting for a few months or even a year and trialling the lifestyle before buying. Too many people sell up and move, just to find themselves returning a few years later.

The reality may not match your expectations, or one partner may die, leaving the other feeling lost and lonely.

Here or overseas?

New Zealand’s not a cheap place to retire.

And the winters in some places can be bonechilling.

Wherever you move, get out, join clubs and organisations.

Volunteer, and become part of the community.

That’s why retired bakery owner Don Brown, known to his friends as “Bali Don”, retired to Bali with his wife. Even with medical insurance premiums factored in, the couple lives comfortably on NZ Super.

Research shows that having great relationships and interests in old age will pay off in an improved quality of life.

It’s a great life for the retirees: sunny and warm every day.

Brown says anyone looking to retire overseas should track down those already living in the place they’d like to live, to ask advice.

Like Brown, some retirees choose to go to countries such as Thailand, where the living is cheaper. Others move overseas to be nearer the grandkids.

Some Kiwis choose to do six months in New Zealand and six months overseas, to follow the sun, but still ensure they keep their full NZ Super payments.

In pre-Covid times, many countries, such as Thailand, Malaysia, Tonga, Mexico, and Spain offered retirement visas.

They often rent their houses out while they’re away.

Tanya Aitken, House of Travel’s Bay of Plenty owner-operator says some of her clients buy gîtes in France because they’re cheaper than baches, and it brings them closer to their children in London.

“That’s my retirement plan,” she says.

But healthcare can be a big issue when you move overseas. Take Brown, who has learned a lot about Bali’s medicinal plants and keeps himself healthy.

There are medical facilities locally in Bali, should he need them. But some retirees may find themselves moving back to New Zealand if they become frail.

www.heartland.co.nz

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YO U R I N V E S T I N G

Sir John Kirwan is best known for his international career in rugby as one of the highest try-scorers in rugby union history.

What is less known is that during his remarkable rugby career he was silently battling depression.

UNFILTERED Game-changer series with Jake Millar Five Minutes with Sir John Kirwan Ex-All Black, mental health campaigner

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On stepping down from the international rugby spotlight, Sir John (known as ‘JK’) began talking openly about his battles with depression, bringing the stigma of mental health into the public arena as the spokesperson for the government’s mental health awareness campaign.

He’s written two books, All Blacks Don’t Cry and Stand by Me, and for several years, he’s been at the forefront of the campaign to heighten public awareness of depression.

He was knighted in 2012.

JK’s free app to boost mental health, Mentemia, is available on Google Play or the App Store.

Jake Millar interviews John Kirwan about surviving lockdown, and how to deal with stress and anxiety.

PERSONAL FINANCE

“What I’ve learned really in my mental health journey is what I can control – and what I can’t control.”

JK, how can we get through these terrible times?

It’s really important to make peace with your emotions and try to get as much normality as you can. There’s no blueprint for this, so no one should be putting pressure on themselves on how they react.

Try to get as much normality as you can, for you.

Personally, I’ve been saying to myself, what can I learn from Covid, what can I take from that to move forward and make the world a better place?

That doesn’t mean that I haven’t had some fear about getting out into the world. It’s been an unusual emotion for me, and lots of people are feeling that anxiety. When I say make peace with those emotions – understand them, where they’re coming from, and then address them.

Lockdown has been different for everyone… How did it affect you?

I’ve been through a major depressive episode way back, so I have some really strong plans around me on a daily basis that keep me well, so really, outside influences don’t really affect the way I’m feeling, because I’ve already had to deal with a lot of stuff, so I have a plan in place for it. I make sure I’m really diligent on my daily mental health plan.

The lockdown has been a time to reflect and a time to really look at improving those skills to keep me well.

It’s been a lot of stress. I’m like everyone else, worried about the future, worried about future jobs, worried about money, worried about a whole lot of different things, but what I’ve learned really in my mental health journey is what I can control – and what I can’t control.

When I was very unwell, I was very worried about a lot of things that I couldn’t control, so I got that back to an understanding of what I could control and put a plan around that. For example, if you’re worried about finances, moving forward: “Right, can we control Covid, can we control what it might do it us?” No. What can we control? We might be able to ring our bank manager, we might be able to cut some spending. Once I do that, I don’t worry about it again and I keep looking at those things, and that’s right across the board.

How can you get those things to a point in your brain where you can be at peace?

I’m thinking that after Covid, people are going to be much more mentally aware. It’s as important as their physical health. We’ve all got physical health, we’ve all got mental health, so If I said to you, are you going to run the New York marathon? Yeah, yeah!

But you can’t go out and run it tomorrow.

You’ve got to go out tomorrow, if you’ve never run before, and run a couple of kilometres and come home. Mental health is no different. You’ve actually got to train it and often you’ll do stuff that doesn’t suit you and you’ve got to keep looking for the solutions that are best for you, and you’ve got to train it and that’s exactly what I did.

I tried things, I really understood my brain and it’s important. The thing I learnt early is that to internalise is not really good for you. If you externalise it, you can actually work on it. And I think often when you’re struggling mentally, you internalise everything.

You said once that talking about mental health was the hardest thing you ever did.

There were three really big things that happened to me. I wanted to jump out of a window in Buenos Aires. I was playing for the All Blacks. There was this thing in my head. I was fighting it and battling it every single day. And I’d just had a gutsful. Then the guy next to me said, “JK, you’ve got a good heart,” and with that, I got through the game the next day, I scored two tries against Argentina, it didn’t matter, it was like in a dream.

Then I got home, and I finally reached out for help. The thing was, for the first years prior to that, I thought what I had was weakness.

I just thought I wasn’t good enough. I thought it was weakness, but it’s an illness.

And it’s like any other illness, if you get it early enough, you can get on top of it.

Who did you talk to? Who do you recommend people talk to?

The first people I spoke to were my family.

Then I saw the All Blacks doctor, Dr John Mayhew. The first thing he said to me was: “John, this is anxiety and depression.” Wow. It’s not just me, it is something! I can now see someone, so I can start working on it.

I was really scared of it. I was scared of the wording; I was scared of the whole illness.

The psychiatrist said to me, JK, if you had a sore hamstring, what would you do? If it got really, really tight, what would you do?

I said I’d stop, ice it, then go to the physio.

She said: “Well, your brain’s no different.”

I tried self-medication and that doesn’t work. Alcohol gave me a little bit of relief for a few hours and then I went back a thousand miles an hour the next day.

It’s like mental fitness, isn’t it?

If you put it on the mental fitness scale, I was very unwell, terribly unfit. The most important person to look after in that early stage is you. Get your health right and your mental fitness right. I think the most important thing is to have a really strong group around you that you trust and care about – and finding the professionals that suit you.

Do you know what caused it?

The reality is that stress and anxiety are now the new norm in our lives, right? If you keep pushing yourself and you don’t look after your health, then you are going to start suffering and you might not get really unwell like I have, but you won’t be thriving. I’ve gone from surviving to thriving.

Any sportsman has two types of injury, a fatigue kind of injury where they’re just working so hard and their hamstring goes, or an impact injury. I don’t think that the mind’s much different.

Mine was this constant stress and anxiety, and it might’ve been because I had anxiety as a kid that I didn’t recognise, or it might’ve been that I was an All Black and came under all this pressure, but the most important thing is, my job now is to get incredibly well.

The Mentemia app is available on Google Play or the App Store.

If you to need to talk to someone, the following free helplines operate 24/7: Depression Helpline: 0800 111 757, Lifeline: 0800 543 354, Need to Talk?

Call or text 1737, Samaritans: 0800 726 666, Youthline: 0800 376 633 or text 234.

* Full interview on www.unfiltered.tv SUMMER 2020

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JUNO 65

PROPERTY

Data Versus Emotion When you’re investing, put your emotions away and look at the numbers instead, says JUNO economist Ed McKnight.

Have you ever thought: “I like that property down the road … maybe it’d make a good investment”?

reason for that is when you become a property investor, you go into business for yourself.

Or, what about: “Maybe we’ll retire in Tauranga.

Let’s invest there, so we have somewhere to go to, if we need it.”

Your goal is no longer the enjoyment of the property, or long-term family stability. Instead, your goal is long-term profitability.

You’re not alone. So many Kiwis make investment decisions and, in particular, property investment decisions based on what they like.

That’s not to say that your tenants’ comfort doesn’t matter, simply that you can’t look at property the same way you used to. Your mindset has to shift.

And that thinking is understandable, right? If you’ve only ever bought properties to live in yourself, then it makes sense that in the absence of other information, you’d look at investments the same way you always have.

When you’re looking at a property as an owneroccupier, you think about how it’ll feel to walk into the kitchen early in the morning, with the underfloor heating warm and toasty. You imagine creeping over to the counter to hit the ‘long’ button on the Nespresso machine.

That’s why the logic many first-time property investors use to justify a purchase is: “If I’d want to live in it, then surely tenants will, too.”

The trouble is, while this line of thought is understandable, they could almost be the opening lines for nearly every property investment horror scene ever seen.

Put yields over pride But, as you move to become a property investor, your marker of success has changed. Now, you’re looking at budgets, yields, growth projections, and ensuring that you consistently have tenants and avoid owning a house with no one paying rent.

It’s a business Emotions have no place in investment. And the

Let me give you a small but simple example of how your mindset might need to change.

SUMMER 2020

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JUNO 67

YO U R I N V E S T I N G

Your goal is no longer the enjoyment of the property, or long-term family stability. Instead, your goal is long-term profitability.

Let’s pretend that when you search for properties to live in yourself, you look for modern wooden benchtops.

Whenever you have friends over for a glass of wine in your kitchen, you love how these wooden benchtops look like they’ve come right out of a magazine.

And because of this, you take exceptional care of them.

Beauty versus work If you then go searching for an investment property and see one with beautiful wooden benchtops, you might think: “This is perfect, who wouldn’t want to live here?”

But then tenants move in. Perhaps they don’t take as good care of the house as you would. When you inspect the property, you find the wood has been damaged. Maybe it’s been marked, scratched or discoloured.

The property isn’t as well maintained as you would like when it comes to renting out the property next time.

What you missed is that, in this situation, a lowmaintenance, durable steel or stone benchtop

might be more appropriate for tenants. That’s because a more durable material is harder to damage and more straightforward to replace than wood.

Cool shares versus growth The same mindset shift needs to happen when you start investing in shares.

Instead of thinking, “I like this company” or “I like Moa beer, wouldn’t it be cool to own part of a beer company?” you instead need to ask questions like: •

Does the stock feel under or overpriced?

•

What’s the mix of capital gains and dividends the stock has achieved in the past?

•

And do I think the company will be in a more profitable position in the future compared to today?

The good news is that just by reading this magazine you’re showing that you’re committed to becoming a more switched-on investor.

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YO U R I N V E S T I N G

Investors Under Pressure With a bewildering range of new regulations coming, property investors may be struggling to keep up. Bindi Norwell of the Real Estate Institute of New Zealand looks at what’s ahead.

It’s a busy time for investors – and it can be a worrying time.

A newly elected Labour Government’s back in power, bringing some uncertainty.

And investors have to make sure their properties are ready for a raft of new laws set to come into effect over the next three years.

Let’s look at the changes landlords face.

Healthy Homes Investors should already be familiar with the Healthy Homes legislation because new rules for insulation came into effect on 1 July last year.

This law’s about ensuring tenants have access to warm, dry rental properties that will help raise the standards of our housing stock and protect tenants’ health.

The most urgent change investors need to understand is that the Compliance Statement deadline is looming – it’s been pushed out to 1 December from 1 July this year, because of Covid-19.

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SUMMER 2020

From 1 December, every landlord must include a statement of their current level of compliance with the Healthy Homes Standards in any new or renewed tenancies.

You’ll probably need to get inspections by qualified tradespeople, or those with sufficient, relevant experience, because the information you’ll need for compliance statements is quite technical. It includes: •

Ceiling and underfloor insulation R-values. R-values are a measure of how well a barrier, like insulation, a window, a wall, or a ceiling, stops heat escaping.

•

Heating requirements, or any ‘top-up’ allowances for existing heaters.

•

Statements around efficient drainage systems and ventilation systems.

•

Whether a property has any enclosed subfloor spaces, and if so, whether the space has a ground moisture barrier.

Not too far behind those rules are the wider healthy homes standards.

From 1 July next year, private landlords must make sure their rental properties comply with the healthy home standards within 90 days of any new or changed tenancy, including the heating, insulation, ventilation, moisture ingress, drainage, and draft-stopping standards.

You can find more detailed information about these changes by visiting www.tenancy.govt.nz and looking up the healthy homes standards.

Residential Tenancies Amendment Act The Residential Tenancies Amendment Act (RTA) was passed in August and there were two key changes that came into effect right away.

Transitional and emergency housing became exempt from the Act. And landlords can now only increase rent once every 12 months, where in the past, increases were allowed once every six months.

PROPERTY

Any rent increase notices given to tenants from 12 August on must comply with the new 12-month rule.

Phase 2 of the legislation comes into effect from 11 February next year. Key changes investors need to be aware of include: 90-day notice Landlords will no longer be able to give a no-cause 90-day notice to end a tenancy.

To end a tenancy for anti-social behaviour, the tenant must have been given three written notices for anti-social behaviour within 90 days, and the landlord must apply to the Tenancy Tribunal with evidence of this behaviour.

Other valid reasons for terminating a periodic tenancy can be found at www. tenancy.govt.nz Fixed-term tenancies Fixed-term tenancy agreements will now automatically convert to periodic, or ongoing, tenancies, except in a few cases: •

If a landlord gives notice using one of the reasons listed in the RTA for periodic tenancies.

•

If a tenant gives notice for any reason at least 28 days before the end of the tenancy.

•

Or if both parties agree to extend, renew, or end the fixed-term tenancy.

Minor changes to the property For the first time, tenants will have more freedom to make minor changes to the property they rent, like adding shelving, baby gates, picture hooks, curtains, or window coverings.

They can also secure furniture or appliances to protect against earthquakes or to make a property child-safe.

Advertising a property for rent Rental properties will no longer be allowed to be advertised without a rental price listed.

The new rules have also prohibited rental ‘bidding’, where tenants might try to bid more than competitors to secure a flat. Nor can landlords encourage tenants to pay more than the advertised amount.

More powers for MBIE The Ministry of Business, Innovation and Employment, as the regulator, will have more power to take action against people who’re not meeting their obligations under this new phase.

The Tenancy Tribunal can now hear cases and make awards of up to NZ$100,000 (up from NZ$50,000).

Privacy changes From 1 December, new changes to the Privacy Act also come into effect.

Privacy has also been stepped up.

Landlords now have responsibilities around the personal information they collect from tenants and store.

If someone’s involved in a published Tenancy Tribunal case and is successful, they can apply for a suppression order to remove the names and identifying details from the published case.

Violence rules The third phase of the RTA will take effect no later than 11 August next year.

Under Phase 3, tenants who are experiencing family violence can withdraw from a tenancy by giving just two days’ notice.

Also, if a tenant assaults the landlord, owner, a member of the landlord’s family or the landlord’s agent, and the police lay a charge, the landlord can give the tenant 14 days’ notice to leave the property.

More information can be found at www.privacy.org.nz.

Still more to come As part of its housing manifesto, Labour has announced that it will introduce a code of conduct to make sure that property management services meet professional standards.

It says it will repeal and replace the Resource Management Act 1991 and will review and modernise the Unit Titles Act 2010.

So far, we don’t know when these proposed changes will happen, but landlords should look out for these in coming months.

Bindi Norwell is Chief Executive of the Real Estate Institute of New Zealand.

SUMMER 2020 |

JUNO 71

YO U R I N V E S T I N G

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PROPERTY

How to Invest Outside Your City You like living there, but your own neighbourhood might not be the right place to invest. Andrew Nicol of Opes Partners says you may be able to buy cheaper and better in another town.

Buying what you know makes sense when we’re talking about replacing your faithful running shoes, your go-to toothpaste, or your favourite pair of jeans.

But that doesn’t necessarily translate into a wise property investment strategy.

That’s why many property investors will buy real estate in different cities, especially away from where they usually live. This offers three main benefits: Diversification. If you already have significant exposure to the property market through your own home, do you really need more exposure to it?

Timing. Different regions are often at different points in their property cycle.

Investing outside your home city allows you to put your money in areas where there is an opportune time to invest.

Affordability. If you live in Auckland, you may not be able to afford to buy another property in the Queen City. However, Canterbury’s median house price is just over half that of Auckland’s, so investing there may be more attainable.

There are clear benefits to investing outside

www.opespartners.co.nz

your home city, but what is often less clear is how to actually do it.

87.75 per cent of the national median house price.

In my experience, there are five steps to take to purchase a rental property outside your home city:

That means that if the New Zealand median house price were $500,000, on average, we would expect the average house price in Canterbury to be $438,750.

1. Find the right region Find the right region that is at an opportune point in its property cycle. Suppose you’re the type of investor who cares about the long-term price of your property. In that case, you need to consider where each region sits within its current property cycle.

Often you can use a graph that considers where a region’s median house price sits compared to the New Zealand median house price.

If you’d like to explore this data in more detail, you can find the data for each of the regions on the Opes Partners website, www.opespartners.co.nz.

This can give a sense of how overpriced or under-priced a region’s houses are, compared with their long-term fundamental value.

Over the past 27 years, Canterbury’s median house price has, on average, been

But right now, Canterbury’s median house price is 73.23 per cent of the national median house price – 16.55 per cent below its long-term average.

That suggests that for long-term buy and hold investors, Canterbury could be an excellent region to invest in right now.

2. Find the right suburb that has a mix of growth and yield Find the right suburb that has a mix of growth and yield. Once you’ve selected a city to invest in, you need to get even more specific.

If you decide to invest in Auckland and go to realestate.co.nz, you’ll find that there are more than 10,000 properties for sale in the region.

That’s why you need to pick a few suburbs you want to look into and conduct further research into these.

YO U R I N V E S T I N G

You can look at hard data, like projected population growth; estimates of income per person, or the level of education within a suburb.

But it’s also essential to build a relationship with developers and real-estate agents in the area, so they can tell you about future opportunities.

However, I find maps showing the median gross rental return for suburbs in Auckland most useful.

If a developer or agent knows they’ve got a good deal, they’ll often first talk to investors and companies they’ve worked with in the past.

Some show the historical house price growth of Auckland suburbs over the past 20 years. This can show areas that have solid fundamentals that may attract better house price growth in the future.

Maps can help investors find suburbs with a mix of good rental yields and good historical growth. Long-term investors will ideally want a combination of both.

The Auckland suburb of New Lynn, for instance, has experienced 7.41 per cent compounding annual growth over the past 20 years and achieves a gross yield of 3.5 per cent in this data set.

This mix of both growth and yield could make it worth looking at further.

3. Find the Right Properties Find the right properties that meet your buying criteria.

To find the right property within your chosen suburb, you can either do this yourself or work with professionals who can source properties on your behalf.

If you’re running this process on your own, then you can look online at websites like TradeMe, realestate.co.nz, or specific real estate agents’ websites.

The alternative is to work with a professional property partner or propertyfinding agency to find properties on your behalf.

concerns about your ability to rent out the property you’re buying?

As an investor, if you’re purchasing a property outside your city, you’re unlikely to have a deep understanding of that local market.

So, it’s essential to lean on the expertise of people who are active in that market dayto-day.

5. Do a site visit Conduct a site visit or do a pre-purchase inspection to make sure it stacks up.

Once you’ve found the right property, get it under contract and go through the duediligence process.

All these steps, up to this point, can be done from the comfort of your home city.

Your next step is to go and see the property.

4. Talk to professionals Talk to professionals on the ground – they’ll know something you don’t.

Even if you invest in a new property that hasn’t been built yet, you should still go on a site visit to build a relationship with the developer.

When you’re working through due diligence, and working with a solicitor to review council documents, I recommend that you talk to a local property manager.

To be a successful property investor, you need a tenant paying rent, so you can pay your bills and service the investment mortgage.

For each specific property you invest in, you’ll want to know: •

What sort of tenant are you likely to get in the market?

•

How long the average tenant might stay in your property?

•

Does the property manager have any

This will also give you the chance to see examples of their previous work.

This is usually the point where the rubber meets the road, and you’ll decide whether this investment is right for you.

Go one step further This process may seem daunting at first.

However, once you’re familiar with each property market, you can truly get the benefits of diversification.

If you’d like to dig more into the data, you’ll find all the data for each of New Zealand’s 16 regions and four major cities is available for free on the Opes Partners website. Go to www.opespartners.co.nz.

Go to www.opespartners.co.nz to book a free session on how to become a property investor.

ADVERTORIAL

Which would you choose?

Development Option 1 Keep existing house, remove garage, build two new homes

What Can You Build at Your Place?

Development Option 2 Remove all existing buildings, build two new duplex structures (4 houses)

Development Option 3

Thinking of developing your land?

There’s no better time to build and subdivide than now, says Brendon Hewett, Planning & Subdivisions Manager at Ashcroft Homes.

If you own land and have always had in the back of your mind that one day it might be worth subdividing and building, now’s a great time to get the ball rolling.

• The current business climate is well suited to those considering property development. Interest rates are at a record low – so mortgages are more affordable than they’ve ever been.

• Money sitting in the bank is earning very little and could be put to better use.

• Despite an increase in new builds, New Zealand is still short of houses, so demand is strong and house and rental prices remain high.

If you already own a property, you’ll likely understand that much of your property’s value is in the land.

If you can build and subdivide, increasing the number of land titles, there’s the potential for significant profits.

Return on investment The cost of building is usually less than the cost of the land, so building on land you already own provides an excellent return on investment.

Property owners with large sections are taking advantage of the Auckland Unitary Plan, building a further one or two new homes on their land, generating wealth by either selling or renting these additions.

Other homeowners are looking to downsize and develop their property before putting it on the market. Why

www.ashcrofthomes.co.nz

Remove all existing buildings, build 8 new terraced homes

leave an opportunity for a developer to walk in and make the real profit?

building consents are achieved faster with fewer issues.

Savvy landlords with rental properties on large sections are taking advantage of the low interest rates, building further homes to add to their rental portfolio.

• And by building to standard plans, Ashcroft can offer a Fixed Price Guarantee and a Guaranteed Completion Date.

Manage the risks

In addition, Ashcroft Homes is a recognised Qualified Partner with Auckland Council, meaning the process of gaining Resource and Building consents is simplified and streamlined when applications are submitted by Ashcroft.

We’ve all heard horror stories of new-build project blow-outs, where construction ends up costing a lot more than budgeted and taking far longer than expected.

Ashcroft Homes is a building company specialising in property development.

Over the last decade they’ve developed an end-to-end solution that minimises risks and maximises profits for their clients.

With all services, from consents to construction, available under the one roof, property development is a realistic option even for those building for the first time.

One way that risk is mitigated is through building to ‘Standard Plans’. Standard plans minimise risk in several ways.

• It takes only a few weeks to turn around scheme plans for a proposed development using standard plans, compared to months for an original design.

• With standard plans, clients know the build costs upfront and don’t need to spend on design and architect fees.

• Standard plans already have council approval, so resource consents and

What could you build?

Interested to learn what opportunities your land may present? Book a free site evaluation report with Ashcroft Homes.

There’s no cost and no obligation. Book at www.ashcrofthomes.co.nz

✓ Tried and tested standard plans are ready to go ✓ Fixed build prices ✓ Guaranteed completion dates ✓ Resource and building consents ✓ In-house subdivision management services ✓ Comprehensive guarantees

Brendon Hewett Manager | Ashcroft Homes Planning & Subdivisions Team info@ashcrofthomes.co.nz

YO U R I N V E S T I N G

How to Break Into Commercial Property Commercial property can be an easier investment than residential, says John Urlich of Barfoot & Thompson.

Investing in commercial property isn’t complex. It’s just not well understood, says John Urlich, Commercial Manager of Barfoot & Thompson.

“I think the whole concept of ‘easy’ is something to consider,” he says.

“Things we don’t know about tend to be more difficult.”

He believes if Kiwis put in some time and research, they’d soon have enough of an understanding of how it works to buy their first investment property.

Leases are different So, it’s not hard, but it is different to residential property. The first difference is that you’ll need to understand a formal lease, Urlich says.

“A commercial lease differs from the Residential Tenancies Act. The responsibilities and roles of the tenant and the landlord are slightly different.

“However, the long-term nature of lease arrangements means that the landlord and tenant soon form a business relationship – and a good business relationship is key to the success of the investment.”

In residential investments, tenants are required only to keep the property clean and tidy, but commercial leases go a lot further.

That cuts down your maintenance costs: “You’re not having to repaint; you’re not having to put in new electrical points or suchlike.”

“Tenants take a lot more pride in their premises, maintaining and presenting them well,” he says.

Tenants might also have to reinstate the building when they move out, but even that’s not always done.

“With a longer-term lease, you find that a tenant almost has a right to be in your property.

“More often than not, tenants and landlords reach a compromise that serves the interests of both parties.

“All external maintenance is handled by the landlord, but most items in the interiors are handled by the tenant.”

“For example, you wouldn’t want to see them take out a very expensive retail or hospitality fit-out elsewhere.”

www.barfoot.co.nz/commercial

ADVERTORIAL

“It’s not unusual for us to find smaller unit titles for under half a million dollars.”

A worry-free cashflow Long-term leases are a bonus for a savvy investor, says Urlich.

“It’s a lot easier to account for your mortgage and your free cashflow.

The longer the lease, the more worryfree the investment becomes.

“I find in general that a good business that’s operating in premises for a long time has a certain tendency to just get on with it, and the landlord just becomes secondary.

“That’s the ideal investment profile, because less effort’s required from the investor.”

There are cheaper properties Some high-rise office buildings sell for many millions of dollars, but you don’t need a lot of money to get started in commercial investing, says Urlich.

“It’s not unusual for us to find smaller unit titles for under half a million dollars.”

He suggests that new investors look at small industrial units, small retail units, and suburban offices as a start point.

“The relative yield on an investment like that is probably superior to the yields of a similar space in a residential setting. Typically, we see yields for units at the moment anywhere from 4 to 5.5 per cent.”

Yields are how commercial property investors work out the value of an investment. Yield is worked out by dividing rental return by your purchase price.

Says Urlich: “Properties that might have cost you $900,000 to a million residentially may only cost you $400,000 commercially, so the relative return would be significantly better, as much as two percentage points.”

However, to fund commercial

Managing a commercial property can be easier than a residential house.

are lower than they are in residential – as low as 5 per cent for larger properties, compared to 7 per cent for residential.”

“There is a specialist knowledge required, however, the nature of the lease is that basically most items around fair wear and tear in the interiors are handled by the tenant.

What to look out for When you’re looking to buy properties, relative position within a location is probably more important than the actual suburb itself, says Urlich.

“Having a professional look after your property means rent reviews happen regularly. And it’s not uncommon that the management fees for commercial

Consider exposure, car parking, security and how close public transport is, how functional the property is, its layout and the yard.

property, banks demand more of a deposit, says Urlich.

YO U R I N V E S T I N G

Predicting the Unpredictable It’s been a year of upheaval with banks playing hard ball with investors. But Peter Norris of mortgage brokers Lateral Partners has analysed the market, and says things are changing fast.

The year 2020 was meant to be our year, right? The turn of the decade, an opportunity to start afresh and have the most prosperous year of our lives.

Well, that’s what we all thought.

Fast-forward 10 months and what a rollercoaster it’s been.

In January, the biggest issue worrying us was the Australian bushfires which, though terrible, were quickly overtaken in the wake of the global pandemic that followed.

This year’s hit us with lots of things we never expected and because of that, it’s been hugely unpredictable, especially for the property market.

Before Covid, the market was active, and you could feel it starting to build again after a pretty slow couple of years.

Then the first lockdown came and threw all those positive predictions out the window.

Right now, the market is very active, and buyers appear optimistic about the short to medium future.

I say that because of the big number of homeowners and investors I’m seeing that are buying off the plan, turn-key houses that are six to 12 months away from completion, or longer.

I’ve never seen so many people buying multiple properties at once. That says to me a couple of things: 1. Buyers are confident that the market won’t crash in 2021 and that property is a reliable place to put their money.

2. Banks are in fact lending despite the common misconception that they’ve tightened up and are hard to get money from.

So, rather than throw another prediction into the ring, let’s look at what could affect the property market and some things to look out for.

It brought fears of a market crash, of a 10 to 15 per cent drop in house prices, of big increases in the unemployment rate and warnings of a devastating recession.

Credit policy

During events no one had experienced before, experts could only make assumptions and guess what the result would be.

Policies have absolutely been tight, and banks have been harder to get money out of, but much of that has stemmed from the responsible lending code that requires banks by law to protect consumers.

But here we are, and in the space of six months, those same experts have gone from predicting a 10 to 15 per cent drop, to a 15 to 20 per cent increase in prices over the next year.

That’s a huge swing in a short space of time.

www.lateralpartners.co.nz

Banks and their credit policies have slowed the housing market right down over the past couple of years.

After the first lockdown, it was nearimpossible to get a mortgage.

People are saying now that banks are still tight but, in my opinion, that’s rubbish. As a business, we’ve got an over 90 per cent approval rate for our clients’ applications

– and more than 70 per cent of our clients are investors.

At the moment, we’re seeing most people buying multiple properties at once. They wouldn’t be doing that if banks weren’t approving the loans.

Yes, the deal has to work, and the borrower has to be able to afford the debt, but assuming they can afford it, then yes, the money is there to lend.

That being said, banks can turn on a dime and are by nature pretty pessimistic. If we saw a tightening of credit policy and less access to funding, we would see things slow down.

Interest rates This is a simple equation, really. Interest rates are lower than ever, and those rates are fuelling the buyers.

So, the lower cost of funds equals buyers affording more.

ADVERTORIAL

This is one reason we’re seeing investors flood in to buy properties that are now cashflow positive, and first-home buyers paying more than they probably should for houses.

If rates continue to fall, as some predict, then we’ll see that continue to push the housing market higher.

However, the Reserve Bank is clearly nervous about that, so we may not see those drops – and in fact, we may see an increase in rates.

Personally, I think we have at least a decade of these low rates ahead of us, but the Reserve Bank won’t want things to get out of control and will look at ways to slow the market down.

LVR restrictions I believe that the most likely change in the short term is that the Reserve Bank

will bring back loan-to-value ratio (LVR) restrictions to restrict buyers’ borrowing ability.

This is a measure that’s generally targeted at investors and it means you’ll need a bigger deposit to buy an investment property.

What this would do is slow down the number of multi-property purchases we’re seeing, by giving investors less access to equity.

I don’t see this having a big impact unless those restrictions meant investors needed a 40 per cent deposit.

Access to capital We’ve got more banks, plus some nonbank lenders and some ‘near-banks’ – and more access to capital – than we ever have before.

This creates a competitive lending environment and means that people can borrow who may not have been able to before, and they can borrow more.

What’s more, these near-banks are really competitive on price, so lending through them doesn’t mean paying through the nose.

This makes them a viable option for both short and long-term borrowing. I don’t see this disappearing.

There’s a lot of noise in the media which can confuse you about what to do, as a buyer and as an investor.

I’d say that if you surround yourself with advisers who are on your side, you’ll be in the best position to make the best decisions. That works the same, whether the market’s going up or down.

YO U R I N V E S T I N G

What Goes Up in Value Quicker?

If you want to see your property increase in value faster, some people say it’s better to buy a standalone house, others a townhouse, and still others an apartment. JUNO economist Ed McKnight has the answer.

Scrolling through Facebook a few weeks back, a post came up in my newsfeed that grabbed my attention.

It was from the New Zealand Property Investors Chat Group, a Facebook group where investors quiz each other about real estate.

One Taupo-based property investor asked: “I’m looking at investing in a townhouse, but is it going to go up in value as quickly as an apartment or a standalone house?”

As can be expected on social media, a chorus of property investors quickly chimed in.

In this case, they were singing the ageold advice that houses appreciate the fastest, followed by townhouses, and then apartments.

That’s what’s typically been said in property investor circles. But is it true?

And if it is true, is the difference in capital growth meaningful enough to pay attention to?

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YO U R I N V E S T I N G

We ask the experts ‘Not always’ is the answer to both questions, according to data released to JUNO by property data firm, CoreLogic.

The data does show that apartments have historically grown in value more slowly than townhouses and standalone houses in the country’s three major cities.

Two-bedroom apartments in Wellington appreciated at an average of 5.37 per cent a year between January 2000 and July 2020.

Over the same period, two-bedroom flats and townhouses appreciated at the higher 6.72 per cent annually, while two-bedroom standalone houses appreciated not as rapidly but still very well at 6.63 per cent each year, on average.

The trend of apartments appreciating more slowly than other building types is seen across all number of bedrooms in the three major centres, with only one small exception.

How much difference?

That leads us to question the size of the difference.

When apartments are compared with standalone houses with the same number of bedrooms, that is, two-bedroom apartments versus two-bedroom houses, the difference in capital growth has historically been between 15 to 49 per cent less growth per year.

But when you’re comparing townhouses and standalone houses, the trend isn’t as straightforward, for several reasons.

The first is that data companies collect information about individual properties from district and city councils. There are 67 of these territorial authorities throughout the country.

Councils differ The issue here is that there is no consistent method that councils use to classify buildings. A townhouse could be called a unit, a flat, a townhouse, or a residential dwelling within different council systems.

In our simplified data set, the results are presented as ‘flats’ and ‘residential dwellings’.

That means there could be some cross-over, where a townhouse is sometimes recorded as a ‘flat’ and at other times as a ‘residential dwelling’. This makes it harder to draw reliable conclusions.

Putting that aside, for the purpose of this analysis, we’ll call ‘flats’ townhouses and ‘residential dwellings’ standalone houses.

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Even so, the second factor making it tough to draw a conclusion in the ‘townhouses versus standalone houses’ showdown is that in some cases flats achieved higher annual capital growth than houses.

Over the past 20 years, this has been the case for two-bed flats in Hamilton, two-bed flats in Wellington and both three and fourbed flats in Christchurch.

In cases where standalone houses achieved higher capital growth, the difference is sometimes marginal, and is certainly less consistent than the trends we saw for apartments.

Take four-bed ‘flats’ in Auckland as an example, which over the period increased in value by 7.08 per cent per year, on average. That compares to 7.47 per cent for four-bedroom ‘residential dwellings’.

These four-bedroom Auckland-based flats achieved 5.2 per cent less annual growth than residential dwellings, but the growth gap is significantly smaller than the 14.6 per cent gap that was the case for four-bedroom apartments over the same time.

Apartments not a winner So, we can confidently say that apartments get lower capital growth than townhouses and standalone houses. But we can’t be as confident in declaring a winner between standalone houses and townhouses.

The real message here is that, although received wisdom in property investment and other fields may sound logical on first hearing – that doesn’t mean it’s accurate.

A mate in the pub or a friend on Facebook may strongly assert something to be the case.

But, as I’ve shown, it doesn’t mean it’s true.

YO U R I N V E S T I N G

How Did Your City Do? There have been some significant median house price increases across the country.

Bindi Norwell of the Real Estate Institute of New Zealand drills down in the data.

With record low interest rates and the removal of loan-to-value ratios (LVRs), investors are rushing back into the market and competing with first-time buyers for properties.

As well as Auckland, there were records set for median prices in Waikato, Bay of Plenty, Gisborne, Taranaki, Manawatu/Wanganui, Wellington, Canterbury, and Otago.

That’s contributing to the big price rises we saw in the September month.

In September, every region in New Zealand had an annual uplift in median house prices.

Median house prices across New Zealand increased by 14.7 per cent, from $596,956 in September last year to a new record high of $685,000 in September this year, and up from $675,000 in August this year – a 1.5 per cent lift in just a month.

More than half the regions saw record median prices, and so did 19 territorial authorities.

Median house prices for New Zealand, even excluding Auckland, increased by 17 per cent, from $500,000 in September last year to a new record median price of $585,000, and up from $570,000 in August this year, which was a 0.7 per cent increase.

Auckland’s median house price shot up by 12.6 per cent from $848,000 at the same time last year, to $955,000, a new record high.

The price was up from $949,500 in August this year, which was a 0.6 per cent increase.

In total, those of us living or investing in nine regions saw record median prices in September.

Double-digit increases Only two regions didn’t see double-digit increases, which shows just how strong the market is right now.

Across the regions, there has been some very strong price growth; take Waikato, which saw a record median price for five months in a row now.

Similarly, Taranaki and Manawatu/Wanganui have had three consecutive months of record median prices.

These sort of price increases have continued to defy even the most bullish of market commentators.

With too few properties up for sale, at this point it looks as if prices will continue to rise as we head toward Christmas.

www.reinz.co.nz

PROPERTY

Median House Price Changes

Northland

16.1%

Year–On–Year September 2020

Bay Of Plenty

17.8%

Auckland

12.6%

Gisborne

Waikato

45.8%

14.4%

Taranaki

21.3%

Mananawatu/Wanganui

Hawke's Bay

16.6%

17.0%

Tasman

7.1%

Wellington

13.1% Nelson

15.0%

Marlborough

14.2%

West Coast

35.1%

Canterbury

11.1% Southland

7.1%

Otago

20.7%

National Median Price

Up 14.7%

www.reinz.co.nz

YO U R I N V E S T I N G

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BUSINESS

Wanted: Businesses to Buy If you’re wanting to sell your business, there couldn’t be a better time.

There are buyers lining up to give you their money, writes Brenda Ward.

The business sales market is facing a challenge – there’s a gap between supply and demand. They’ve got a queue of buyers, but they’re running out of businesses to sell.

Kiwis are coming home from overseas with cash in their suitcases, and people who’ve been made redundant are looking to become business owners, at the same time as company owners are hunkering down, instead of selling up.

The outcome is that prices are going up, due to increased demand and a lack of listings.

The average sale price for a business has increased 4 per cent year on year.

Ex-pats drive demand Managing Director of ABC Business Sales, Chris Small, says: “Returning ex-pats and corporate employees who have lost their jobs are the most common profile of buyers getting in touch with us at the moment.

“It’s clear that these are Covid-created categories, if you want to put it that way, but the positive thing is they are also usually very well-capitalised, wellqualified buyers.”

ABC Business Sales sells more than 35 per cent of small and medium-sized businesses across New Zealand.

In the five months since the first lockdown, 20 per cent more people have registered as interested buyers of businesses, compared to May to September last year.

This is reflected in a boom in traffic to the ABC Business Sales website, says Small.

“We’ve seen a big increase in visitor traffic, averaging 20,000 users per month, up from 17,000 for the same period last year.

“Our data was sourced from signed confidentiality agreements, which have numbered 1100 to 1400 a month over the past five months,” says Small.

So, people are wanting to buy businesses, but owners aren’t selling. Why not?

New business listings with ABC are down more than 30 per cent compared to the same period last year.

“Given the extreme uncertainty businesses are experiencing as a result of Covid, it’s not surprising that many business owners think the current market is not the right time to sell their business,” says Small.

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Survival, not selling “Many business owners are preoccupied with surviving, rather than preparing to sell,” he says.

“They may be thinking that they may not maximise the value of their business in this environment.”

The reason is clear when you understand the process of selling a business.

When a business is valued for a possible sale, the owner must disclose financial documents showing their cashflow, profit and loss statements, and any relevant assets.

When a business has been hit by a lockdown and is recording dramatically reduced profits, the owner naturally won’t 88 JUNO |

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see this as an optimal time to open the books to buyers, says Small.

Many owners are preferring to hold off and hope to build up sales and profits before entering a business sales process.

Buyers are waiting “Our message to business owners is the current market has a lack of businesses for sale, so any good businesses that come to market are being acquired quickly and at an elevated price.

“Purchasers are happy to accept that Covid has reduced profits for a period of time and will buy the business at a valuation based on profits generated in normal trading conditions.”

He says the imbalance between supply and

demand for business sales is following the housing trend, where we’re also seeing elevated prices.

The surge of buyers comes about from a number of factors, he says: •

Professionals and corporate executives are changing careers or pivoting after Covid-19.

•

People who have lost their job during Covid are looking for a secure career or an income source they can control.

•

Returning Kiwi ex-pats are looking for career and lifestyle freedom. There’s a lack of employment opportunities with the big corporates, which is making business ownership a very attractive option for this group.

“Our message to business owners is the current market has a lack of businesses for sale, so any good businesses that come to market are being acquired quickly and at an elevated price.”

•

Aucklanders are relocating to the provinces, freeing up capital and making career changes in their new neighbourhoods.

•

Investors are looking for alternatives to the low interest rates offered by the bank. Investing in a business offers a very high yield on any cash investment.

•

Buyers are looking at the returns they can get from direct investment into a business, versus the uncertainty of the share market.

Some better than others Small says those firms with a limited exposure to the impacts of Covid are in demand.

Businesses with recurring revenue are popular, like IT firms and subscription models like property maintenance businesses.

The rise in home renovations is driving

keen interest in building products, manufacturers, and local suppliers to Mitre 10 and Bunnings.

Infrastructure service companies are largely unaffected, driving interest in roading, commercial landscaping and construction.

Businesses doing compliance, building permits, health and safety, food, and healthcare businesses are all sought-after.

Buyers, some of them ex-pats, are also looking for export-focused businesses with a Kiwi spin.

Another boom area is any businesses that allow people to work from home or offer a secondary income for the household.

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YO U R I N V E S T I N G

Business Vision Kiwi companies are coming up with some innovative solutions. Brenda Ward showcases some that are working smarter to bring you business that inspires.

The name game

Architectural Planners designs the buildings and manages the entire process for investors.

“Our goal is that, visually and architecturally, the project will be successful and achieve the clients’ goals, whether it’s for resale, rental or to live in.”

A great name is more than a name: it’s your sales pitch, ethos, and reason for being, all rolled into one, says Sarah Walter, of The Namery.

The former ad agency copywriter believes that the name of a brand has a huge power to shape a firm’s future, so she started the specialist naming and copywriting consultancy, in 2012.

“Naming your new company or product is crucial. Ask Virgin. Or Apple. Or 2 Degrees,” she says.

“Your name is the first thing your customers meet, so the connection needs to be instant, believable and memorable,” she says.

“Naming is about making the complex simple. So simple that your whole reason for being or point of difference can be summarised in one, two or three words.”

Winning names include NewsHub, Nextro, Umbrellar, Qalibre and bidr, an auction website. Not-forprofit names include Safe to Talk, a sexual violence helpline, and Minds for Minds, for autism.

“Our sweet spot is helping brands articulate what they’re about, so they can get their brand spanking new brand out there in the world.”

“After seeing first-hand the headaches, hard

www.architecturalplanners.com

www.thenamery.co.nz

Turning Kiwis into ‘backyard’ developers Property development isn’t only for the wealthy or professionals, says Darren Paddock of Architectural Planners.

“It’s for anyone with a big section who has a new opportunity to subdivide through the Auckland unitary plan change, or who’s looking to build for a passive income.”

decisions and often unforeseen crises involved, I knew that there was an opening in the market for consultants to cut the risks of the unexpected, while offering quality design and making the process easier,” he says.

Paddock set up his first business, 3D Factory, in 2013 creating 3D renders for architects, developers, real-estate professionals and to help with council consents.

Paddock calls his new business ‘an all-in-one solution for landowners’. He says investors can just push the ‘go’ button and he does the rest.

He’s since opened the innovative new company, Architectural Planners, to offer the full design and management service, backed by the professional architectural design skills of 3D Factory.

He’s combining his architectural skills and consenting experience to simplify and streamline the complexity around property development, so that anyone can become a ‘backyard’ developer.

“We’ve discovered that to complete a successful residential development, you need great sales and marketing, design and construction skills.

Student Eliot Jessep started importing party games into New Zealand four years ago, and now he’s at the head of a games empire. Now he’s 25, Jessep’s business Game Kings is creating its own games, as well as selling favourites.

“It started with a really tiny TradeMe account, and it’s ended up in a pretty big online store called Game Kings, which is the biggest online store in New Zealand for board games now.”

King of cards Two years ago, Jessep published the company’s first original game, called Kiwis When we’re bored, we turn to card games and board games to pass the time – and with lockdowns, Versus Morality, a bad-taste party game for Kiwis who love laughing at themselves. that’s become a big business opportunity for one young entrepreneur.

“It went super-viral,” he says.

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Spurred by that success, he’s developed more games, including one that’s become a huge hit with Kiwi families.

“Our biggest seller for over a year now is a game called Tākaro, that helps people of all ages learn te reo Maori.”

Game Kings had a boom over lockdown when Kiwis were bored and now it’s up 210 per cent.

Friend Ben Hawken has bought into the company and they’ve sold 40 per cent of the business to an investor.

“We’ve got pretty huge ambitions for how big we want to take it.” www.gamekings.co.nz

P R O U D LY MAR LB O RO U G H

Art

YO U R I N V E S T I N G

Nouveau.

Murky tones add a sophisticated spin to a grown-up summer décor.

1

2

3

5

6

1 Urla Vase – Boltofcloth.com, 2 Jasper II sofa – kingsliving.co.nz, 3 Citta Stoneware serving bowls – Paperplane.com, 4 Slim natural rattan buffet – Corcovado.co.nz, 5 Ercol originals nest of tables – Goodform.co.nz, 6 Sukat Makkaralla Tumbler in coral – Boltofcloth.com.

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4

8

Colour your walls to match your gear.

7

9

Resene Endeavour

10

Resene Soulful

11

Resene Chenin

12

Resene Villa White

Visit your local Resene ColorShop for more colour ideas and inspiration.

13

7 ‘Chaos’ – artist Tess Costil – Thepoiroom.co.nz, 8 Warm Nordic Cone Pendant –Goodform.co.nz, 9 Mr Micro Gator Gang – Deadlyponies.com, 10 Gidon Bing brass sculpture – Goodform.co.nz, 11 Louhi Cushion – Boltofcloth.com, 12 AM Kettle – Everydayneeds.com, 13 Ecoya Sakura Madison Jar – Ecoya.co.nz.

www.resene.co.nz

YO U R I N V E S T I N G

Exotic Sights in Asia

Bagan

Asia is a feast for the senses with its spectacular sights, history, food, colour, and culture. Claire Connell shares some insights into the magical continent for your post-Covid bucket list.

Jump on a motorbike or pushbike in Bagan and you’ll find no shortage of things to explore – there are 2,200 temples, stupas, and pagodas across 10,000 hectares.

Myanmar Since Myanmar (formerly Burma) opened its doors over the last decade, its historical sights are more accessible to tourists.

Taj Mahal India About 20,000 stone carvers and artists spent roughly two decades building the white marble Taj Mahal.

Emperor Shah Jahan built the mausoleum as a tribute to his wife, Mumtaz Mahal, who died in childbirth in 1631. The couple are both buried there.

Seeing the Taj for the first time at dawn, you’ll be mesmerised by both its sheer size and the decorative detail.

Mekong Delta Vietnam

Beng Mealea Cambodia

At Beng Mealea, you’ll find yourself scrambling through nooks and crannies inside the ruined temple.

On the outskirts of the main Angkor Wat temple complex is an unrestored temple which has succumbed to nature, so there are large areas of bright green moss, vines twisting around the bricks, and trees emerging from small cracks.

If you’re looking to escape the crowds of Angkor, Beng Mealea is worth the trip out of the city.

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If you think Auckland’s Queen Street is busy, consider the Mekong Delta. At the base of the 4,300km long Mekong River, the delta could be the busiest place in Asia.

In the thousands of waterways, you’ll find south-east Asian life at its simplest.

Vietnamese farmers and fishermen go about their daily life, families live on the river’s edge in small shacks, and boats motor up and down the busy ‘highway’ maze, some stacked with coconuts, fruit and vegetables, rice, and other cargo.

Around every corner on the river is a new, astonishing sight.

Dusk and dawn are the best times to visit. If Bagan is on your bucket list, don’t wait too long. Some of the temples, built from the ninth century onwards, aren’t in great condition and may not stay open to the public much longer.

M AA MRAKZEITN G I N PS LI G AH CT ES

Demilitarised Zone North and South Korea border

Military guards? Check. A fake town?

Check. Barbed wire? Check.

The DMZ separating North and South Korea has all the things that could make for an interesting day trip. The DMZ is the closest most of us will get to closedoff North Korea.

It was set up in 1953 as a buffer zone between the two countries. Tours are the only way to visit this unique spot, as all tours must have a military escort.

See the Freedom Bridge connecting the two countries over the river, the Joint Security Area, plus look through the binoculars to see North Korea’s famous ‘fake town’.

On a clear day you might be able to see North Korean civilians walking on the other side.

Paro Takstang Bhutan

It’s enough to give you the heebie-jeebies climbing up to visit Paro Takstang, which balances on the side of the cliff.

Stay in a Yurt

Also known as the Tiger’s Nest, this monastery is a small collection of buildings 1300 metres above sea level, sitting against a cliff face.

The Himalayan Buddhist sacred site, built in 1692, was where famous monk Padmasambhava meditated in the eighth century.

One of the most iconic sights of South Asia, no trip to Bhutan is complete without this one-day hike from Paro Valley. If you can’t hike the whole way, you can also go by horseback.

Mongolia

If you love camping, you might want to stay in a traditional Mongolian home, known as a yurt or ger.

Yurts are a one-door structure made from felt covers pulled over wooden lattices and columns.

During a trip to Mongolia, you can stay in one with locals, or join a tour which includes a yurt stay. Yurts might look like simple tents from the outside, but inside, a modern Mongolian family may have a television and modern appliances.

Private tours only started in Mongolia 20 years ago, so tourism is still very new. Expect growth in the future, as traditional countries get exhausted by tourism, and tourists look for more authentic experiences.

Animal Safari Sri Lanka

Are you an animal lover who’s always wanted to see wild creatures up close?

The chance to see Sri Lankan elephants, leopards, and bears in their natural habitat used to attract thousands of visitors from all over the world.

The idyllic island off the southern coast of India has spectacular scenery and jungles – perfect for spotting monkeys, crocodiles, and turtles – plus plenty of birds.

Avoid controversial elephant rides, and instead book a national park safari through a responsible tourism operator.

If marine life is more your thing, go blue whale-spotting off the coast, where you may also find sperm whales and dolphins.

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8.

Summer’s Must-haves Be well turned out for summer by investing in these must-have pieces for your wardrobe.

9.

10.

1.

2.

3.

11.

1 Crane Brothers’ tuxedo, www.crane-brothers.com 2 Levi’s Taper cargo pants, www.levis.co.nz 3 R.M. Williams’ Nicholson shorts, www.rmwilliams.com

4.

4 R.M. Williams’ Harrington jacket, www.rmwilliams.com 5 Deadly Ponies’ Phantom Duffle, www.deadlyponies.com/nz 6 R.M. Williams’ Rickaby Boots, www.rmwilliams.com 7 Levi’s Stay Loose Jeans, www.levis.co.nz 8 Working Style’s Mercerized Knit Shirt, www.workingstyle.co.nz

6.

9 Moscot’s Haskel sunglasses in Tort, www.parkerandco.nz 10 Allbirds TrinoXO Tee, www.allbirds.co.nz

5.

11 Allbirds Wool Pipers, www.allbirds.co.nz

7.

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LIFESTYLE 1 Mina’s Local Blazer & Moi Pant, wwww.minaforher.com 2 Deadly Ponies’ Mr Sling Mini, www.deadlyponies.com/nz 3 Kathryn Wilson’s Stephanie heels, www.kathrynwilson.com

11.

4 Hej Hej’s Sidekick Skirt, www.hej-hej.co 5 Kowtow’s Journey Shirt, www.kowtowclothing.com 6 Allbirds’ Wool Pipers, www.allbirds.co.nz 7 Kowtow's Echo dress, www.kowtowclothing.com 8 CAMILLA AND MARC Cirro skirt, www.camillaandmarc.com 9 Levi’s High Loose Jean, www.levis.co.nz 10 Moscot’s Dudel Sun, in Bark, www.parkerandco.nz 11 C&M Tee, www.camillaandmarc.com

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REGULARS

Book Reviews Reviewed by Sarah Ell

The Only Woman in the Room: Knowledge and inspiration from 20 women real-estate investors

The Psychology of Money

Compiled by Ashley L Wilson Real Estate InvestHER Publishing, $14.99 (via Amazon)

Morgan Housel Harriman House, $35

Women may have the same opportunities as men in real estate investment, but it’s still often the case that female investors find themselves outnumbered by men.

Author and editor Ashley Wilson, who calls her brand ‘Bad Ash Investor’, is one of those women, working with her husband and father on development, investment and residential ‘flipping’ enterprises in the US. In this book, she brings together writing from American women from a broad range of backgrounds, ages, and ethnicities who have become successful residential property investors.

Housel is a partner at United States ethical venture-capital company The Collaborative Fund and is a former columnist.

The Psychology of Money brings together 18 linked but standalone stories exploring the ways people think about money, with a common theme of the unusual but persistent beliefs which govern how we act in financial situations.

It’s based on a report Housel wrote in 2018 outlining 20 of the most important ‘flaws, biases, and causes of bad behaviour’ he’d seen — a report more than a million people have read.

Among them is popular blogger and social-media personality Brittany Anderson, aka Investor Girl Britt, who bought her first house at 18 and now has a large and valuable portfolio.

Money, as Housel points out “is everywhere, it affects all of us, and confuses most of us . . . Few topics offer a more powerful magnifying glass that helps explain why people behave the way they do than money”.

What makes this book different to other publications, which tell the stories and reveal the ‘secrets’ of successful investors is its casual, candid tone.

The pieces cover topics ranging from getting wealthy versus staying wealthy, through smart decision-making, to the importance of saving — and why most of us don’t do it.

Because the contributors are women, talking to female readers, it has a friendly style and you hear each authors’ voice.

Another theme is ‘be nicer and less flashy’, the idea that we're more likely to be respected and admired through being a good person than by having expensive possessions.

This is refreshing in a field often dominated by male experts who tend to be less personal about their own experiences.

The range of topics discussed includes starting out in investment, working with partners or family, entrepreneurship, networking, and identifying your ‘why’ – the motivation at the heart of why you want to commit to investing and making money through property.

That’s something you won’t see discussed in many investing books, but it’s obviously critical to many of the women in this book who have often taken risks and given up security in order to pursue their investment dreams.

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Housel stresses he is not trying to give financial or investment advice, but the last chapter does bring together some learnings to help readers to make better decisions about money, through understanding their own minds.

As he says, “There is no one right answer. There is no universal truth. There’s only what works for you and your family, . . . in a way that leaves you comfortable and sleeping well at night.”

This highly readable, entertaining book is full of interesting gems for those looking to learn more about how we think about money, and how we can use that to our advantage.

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Which is right for me?

Propolis Mint Toothpaste With the antibacterial properties of propolis, the freshness of mint and the sweetness of Xylitol, Propolis Mint Toothpaste leaves your mouth and teeth feeling fresh and clean.

There are no fluoride, gluten, or artificial sweeteners in this product. It’s ideal for people who want freshness and excellent oral hygiene.

Bees convert flowers and natural extracts into a range of natural antibacterial products that have a proven effectiveness, like honey, royal jelly, and propolis.

Propolis Charcoal Toothpaste

Propolis is the natural antibacterial product that bees use to sterilise beehives and keep them free from infection.

The activated charcoal in Propolis Charcoal Toothpaste gently gets rid of unsightly stains on your teeth.

In its research, ukiwi scientists discovered that its antiseptic and antibacterial qualities protect human teeth and gums, discouraging dental plaque from forming on teeth.

This is an ancient and natural way of cleaning your teeth, plus charcoal absorbs breath and gum odours. It’s fluoride-free, gluten-free, and has no artificial sweeteners.

Do you need a heavy-duty toothpaste because you’re finding that smoking or drinking coffee are staining your tooth enamel?

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Wall Street in Focus Wall Street is where the big money is.

We’re seeing more Kiwis expanding their portfolios to the United States, says Bryan Wilmot of Stake.

The New Zealand Stock Exchange is home to 183 of New Zealand’s biggest and best public companies, some fabulous stocks, and a combined value of NZ$367 billion.

But many Kiwis are hunting opportunities outside New Zealand, adding shares from Wall Street.

You can see why. Take Amazon’s market cap, which is over six times the value of the entire New Zealand Stock Exchange. Staggering.

While size isn’t everything, the liquidity this brings – US$1.5 trillion of Apple is traded every day – is highly appealing to investors.

Moreover, it’s the home of world-leading companies, and Kiwis have done well this year snapping up ‘Covid darlings’ like Zoom for video conferencing and Peloton for home exercise equipment.

And while 2020’s unpredictability has created volatile markets; traders can profit from this uncertainty.

10 MOST POPULAR STOCKS (as of November 4)

1. Tesla (TSLA) 2. Apple Inc. (AAPL) 3. Nio Inc (NIO) 4. ProShares UltraPro Short QQQ ETF (SQQQ) 5. ProShares UltraPro QQQ (TQQQ) 6. Amazon.com, Inc (AMZN)

A range of index, commodity, and currency exchange-traded funds (ETFs) allow traders to make money whichever way the markets move. The US is a market for any season.

7. Workhorse Group Inc (WKHS)

Wall Street is a big, diverse beast and at Stake, since we’ve been giving Kiwis access with no fees on trades, we’ve seen them flocking to it.

9. NVIDIA Corporation (NVDA)

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8. Hyliion Holdings Corp (HYLN)

10. Microsoft Corporation (MSFT)

MARKET INSIGHTS

Amazon (AMZN), Apple (AAPL), Microsoft (MSFT) and Nvidia (NVDA) are big tech companies that are universally in Stake’s top traded lists across the world. Clearly New Zealand is no different in trying to get behind some big tech.

What’s really interesting though, is that Kiwis, more than any other country, are going deep on the electric car industry beyond just Tesla (TSLA), which features in top traded lists in all our markets.

Nio (NIO) and Hyliionn (HYLN) are somewhat popular but not often among our top-traded, and Workhorse Group (WKHS) is rarely ever featured in toptraded lists.

Clearly New Zealand has a real passion for renewables and is also backing EVs as they start to consume the automotive industry.

The last two stocks I’ll mention are interesting in that it is people taking positions and bets on the way the market is going to head.

SQQQ is an exchange-traded fund that tracks three times inverse to the Nasdaq tech stock index. When the Nasdaq goes down 1 per cent, this moves up 3 per cent.

It’s effectively shorting the market.

TQQQ on the other hand, is an exchangetraded fund that is 3 times direct to the Nasdaq. That is, when the Nasdaq goes up 1 per cent, this goes up 3 per cent.

We’ve seen these ETFs rise into the most popular only in recent times because it really seems like Kiwis are watching closely and reacting to what’s been happening in the electoral race in the US. Very interesting behaviour.

We recently ran a poll on Instagram and Facebook about the election. The results were that: •

48 per cent predicted a Trump win, 52 per cent predicted a Biden victory. More interestingly though,

•

68 per cent of people thought the market would go up if Trump won.

•

58 per cent thought the market would go down if Biden got in.

So, this starts to explain some trading behaviour we saw around these two ETFs. When Trump got Covid-19, we saw SQQQ rapidly rise in popularity. That indicates people feeling bearish about the market.

When he was released from Walter Reed, this fell down the ranks and more people traded TQQQ, backing a positive market run.

4 IPOS TO KEEP AN EYE ON IPOs are initial public offerings, where new companies list for the first time on the stock exchange. This year we’ve seen swathes of new names enter life as public companies.

The resurgence of reverse mergers and special-purpose acquisition companies (SPACs) provided a new way for companies to list, but the ageold IPO has provided an avenue for stocks like Palantir, Unity and Warner Music to get access to public markets.

Here’s a few upcoming IPOs Stake traders are watching.

1. Airbnb Speculation has surrounded this unicorn for years while names like Uber and Spotify beat Brian Chesky’s company to Wall Street.

In August, the company announced that it had confidentially filed for IPO. At this stage, the company will be worth between US$20 billion-US$30 billion.

With seven million listings in 100,000 cities worldwide, the scalability of Airbnb is obvious.

It’ll be interesting to see how hotel chains react to this threat. Take Tesla, which has quickly made its way to being the most valuable car company in the world.

Timelines indicate the stock should go public by the end of the year.

2. Bumble Tinder is already tradable through its owner Match Group ($MTCH). In early 2021, its closest competitor in the dating app world, Bumble, is on track to debut. Bloomberg reports the company should go public at a valuation between US$6 billionUS$8billion.

What’s unique about Bumble is the

power lies in women’s hands to make the first move.

The proposition has been valued by users because the app has ticked past 100 million users across 150 countries.

In fact, during the lockdown period, their user base increased by 25 per cent.

3. DoorDash DoorDash is a prepared food delivery service. It’s an IPO surrounded by rumours more than definitive news, but it is speculated to release IPO details in the current quarter.

Food delivery is a massively competitive industry with a score of companies fighting for low-value journeys.

DoorDash has fought through the competition to have almost half of the market share in the US, by most estimates. Competitors include GrubHub, UberEats and PostMates.

Another company powered forward by lockdowns, DoorDash is now available in 4000 cities to 20 million users. It’s expected to list for around US$16 billion.

4. Wish Wish is a primarily mobile-based shopping app, connecting buyers with the factories where goods are produced. Its selling point is the price.

Wish acts as the home for all the knickknacks and gadgets you never knew you wanted, unlike sites like eBay, which have a wider range of higher value and branded goods.

E-commerce is on a tear. Online shopping is an already-strong trend pushed exponential by lockdowns and it’s becoming the default option for consumers. www.hellostake.com SUMMER 2020

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Going Up

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

We exported 2 per cent more in the year ended September compared to the previous year, provisional figures show. That’s remarkable, given how the world is right now. People want what we produce, and we’ve kept the supply chain open.

It just shows people still need to eat.

Going down We’re importing 9.1 per cent fewer goods.

There’s less demand for imported items, there are problems sourcing supply, and supply chains to local produced products have changed.

Bungy bounce

Through the floor

The economy shrank more 12 per cent in the June quarter as the economy locked down – but then it bounced back.

Interest rates continue to drop to new lows. The Big Four banks are offering one-year fixed rates around 2.5 per cent.

The biggest fall in history will be followed by the largest rise in the September quarter, because pent-up demand was unleashed when lockdown ended. The bungy cord was attached.

You can lock in a five-year rate for less than 3 per cent, as long as you have an 80 per cent deposit.

That’s good news for borrowers.

But it’s a worry for those relying on income from term deposits because term deposit rates across the major banks are hovering around 1 per cent, which is below the rate of inflation.

Among all the noise, keep an eye on the level of gross domestic product (GDP). It’s likely it will take until some time in 2022 to get back up to 2019 levels. Some regions will get there sooner.

Turn down the temperature Strong house prices have some saying loan-to-value restrictions should be bought back in, to turn down the heat. I say, no.

I’d prefer to see asset prices directly included again for monetary policy to consider in any new Policy Target Agreement between the Reserve Bank and the Minister of Finance.

It was removed in 2018.

The heat’s on House prices continue to defy predictions of price falls. House prices have risen 6.2 per cent in the past three months and 11.1 per cent in a year. Movements are strong across almost all of the country.

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MARKET INSIGHTS

Down the escalator Both residential and commercial property yields continue to fall, following interest rates lower.

That’s to be expected, given reducing borrowing costs and alternative investment returns such as deposit rates.

But at what point does the spread between interest rates and yields become too narrow?

Need a job?

Money in the bank

Jobseeker benefit numbers, which show unemployment trends, are showing signs of stabilising.

The banks’ coffers are full. People are still putting money into bank deposit accounts, even though term-deposit balances and term-deposit interest rates are falling.

There are still more than 200,000 people registered on the Jobseeker benefit, but the numbers have flattened out. That’s good news.

Total deposits have risen more than NZ$30 billion since the start of the year, with large rises in transactions and savings account balances. Household deposits are up NZ$16 billion.

Mortgage magic Around NZ$150 billion of mortgages will come up for refinancing in the coming year. The average interest rate on Kiwis’ mortgages is around 3.6 per cent.

The pause button Net migration has stalled. There was a surge of migrants coming into New Zealand in 2019 and a mad rush of Kiwis coming back home in the first quarter of the year, which meant a net inflow of around 80,000 people in the year ended June.

But almost all of this happened before the late March lockdown.

The average monthly inflow since April has been fewer than 400 people coming in a month.

But new fixed mortgage rates now are south of 3 per cent, with one special deal around 2 per cent. That means there are big savings round the corner for any Kiwis with a home loan.

Reality check I have to say that the government borrowing big was totally the right thing to do to support the economy.

Interest rates are low. Net government core Crown debt, though, is projected to hit NZ$200 billion by 2024, or more than NZ$110,000 per household.

So, at some stage, interest rates are going to rise.

It’s going to be hard to stop further rises in debt in a country where we have an ageing population, because New Zealand Superannuation costs rise rapidly.

There are some hard decisions around the corner.

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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Snapshot We take a look at some of the events around the world affecting the global economy. From the Americas, through Europe, and then Asia, find out the latest from around the globe this quarter.

Britain

United States The US became the first country to officially exit the Paris climate accord. The accord is an agreement aimed at protecting the planet from climate change.

During Brexit talks, the EU and Britain have so far failed to reach agreement on three sticking points, meaning any breakthrough in securing a trade deal is still a way off.

Ethiopia Mexico Covid-19 cases are out of control, homicides are up and the Mexican economy is tanking, but President Andrés Manuel López Obrador is one of the most popular leaders in the world with an approval rating up from 56 per cent to 62 per cent.

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Ethiopia’s prime minister has sent troops into the northern Tigray region of the country, escalating tensions with the powerful ethnic group, the Tigray People’s Liberation Front.

MARKET INSIGHTS

China What was supposed to be the world’s largest initial public stock offering was stopped at the last minute. Chinese financial company, Ant Group, was set to go public and raise an estimated US$37 billion.

South Korea In response to post-lockdown spend-ups, new vehicle sales in South Korea have been boosted by 23.3 per cent compared to the same month last year. Year-on-year domestic sales in September were increased again.

Australia

Correct at 4 November 2020.

China’s government has advised some Chinese wine importers to stop importing Australian wine.

Reports say other targets were lobsters, sugar, coal, timber, wool, barley, and copper ore.

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MARKET INSIGHTS

Tips for the New Investor Low-cost share platforms have shaken up traditional stock-broking and have turned many Kiwis into hobby investors. Chris Smith of CMC Markets has some tips to turn amateurs into pros.

The shock of Covid-19 and lockdowns across the world were met earlier this year with waves of panic, and share prices dropped. Then share prices picked up worldwide.

We call this rollercoaster in prices ‘volatility’ and volatility always creates great opportunities for savvy investors to buy low and sell high.

One big effect was that it prompted a mass wave of new traders globally, including here in New Zealand.

What suddenly made it easy was the rise of applications which make it possible to access the share market from as little as $1 entry.

Figures from the Financial Markets Authority estimate as many as 120,000 Kiwis have signed up to online investing platforms like Sharesies, Hatch, InvestNow, and Stake since the first Covid-19 lockdown began.

And other factors are at work, too.

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Younger investors are finding themselves largely priced out of the property market and have spare cash, and those with money to invest are finding that low cash deposit rates at the bank are leaving them no return after inflation and tax.

This is a real turnaround after decades of trying to raise awareness and grow the investor community, especially after the 1987 share market crash left in its wake bitter lessons that were passed down through generations.

Covid-19 and new technology have played a pivotal role in accelerating this pattern, says FMA chief executive Rob Everett.

How it progresses from here, he says, will depend on new investors transitioning from simply ‘having some fun’ to seeing investing as a long-term commitment.

We’ve seen lower commissions also driving interest in investing.

Traditionally, share broking has been expensive for the low-value buying of shares, but the rise of zero-commission platforms and investment trading apps like Robinhood in the US have changed the landscape – and seen a massive uptake both in New Zealand and overseas.

Brokers can generate income elsewhere to reduce commissions by selling on order flows, foreign exchange margins and cash deposits.

This cost-to-benefit reduction for investors is a real gamechanger. Add to that stronger education online and a focus on customer experience, and these platforms have shaken up traditional stock-broking.

In the future, broking fees will come under the spotlight in the same way that KiwiSaver fees have in recent years, for competition and fairness.

If you’re a new trader and you want to make the step from “just a bit of fun” to something more serious and long-term, here are some tips from my 20 years in the market.

You can usually apply these rules to other types of investment, including property, because these investments all need dedication, and without risk there’s little return.

1. Manage your risk The ultimate golden rule is knowing your risk profile. Invest with funds you can afford to lose.

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general rule, as long as you gain more than you lose on positions, you’ll be a successful trader at the end of each year.

Before you make a trade or investment, do your homework, and calculate your risk-and-reward ratio. Having a manageable portfolio can set you up for success or for failure. Only you can work out this ratio, which differs for everyone.

2. Don’t overtrade Calculate the size of your position, or risk per share you’re willing to invest, consistently across each stock in your portfolio to help manage risk and avoid larger drawdowns in your account balance.

3. Be patient It can take years or even a lifetime to perfect trading and investing.

Even when you think you’ve mastered the art, you’re never truly finished learning.

Legendary investor Peter Lynch once said:

“In the stock market, the most important organ is the stomach. It’s not the brain.”

Having a strong stomach through crises and acting with a plan and not from fear is easy to say but hard to do. Consider the Covid-19 sell-off period as an example of this.

4. Buy high, not low It may go against conventional thinking, but I believe that buying shares at 52-week highs can be more profitable than buying at 52-week lows.

When you buy cheap stocks, there’s a risk you’re buying losing stocks that are cheap for a reason. Buying high-value stocks will mean you have a greater chance that they’ll keep moving up.

5. Apply technical analysis If you want to make better investments, it’s important you know how to evaluate price action based on historical price data.

MARKET INSIGHTS

Fundamental analysis tells investors what to focus on, things like sales and earnings.

But technical analysis is a visual tool showing what others have done in the past and what they may do going forward, such as bases, support, and resistance.

Remember, it’s just a guide to increase confidence in your decisions, not a guaranteed predictor.

6. Sell, sell, sell When it comes to managing risk, selling is more important than buying.

If exit plans are not your strong suit, place a stop-loss order – which, when a predetermined price is reached, will exit your trade.

7. Avoid averaging down Rather than hoping a company can turn things around, instead add shares in stocks that have momentum and have quality, consistent earnings reports.

Trends last longer than most people expect. Averaging into a position is smarter than a full allocation in one go, because picking the right time for entry is never easy.

your own research, but when you’re new to the markets, using financial Twitter and YouTube channels can be helpful… but be very careful and wary of what you hear, and look for trusted proven sources.

8. Accept losses Trading losses are simply a part of investing and doing business. As long as they’re factored into your strategy and process, they’re not necessarily a sign of failure.

10. Trade without emotion Your worst enemy is emotional trading.

Build a strong strategy that you’ll stick to.

Everyone makes mistakes and how you deal with your losses is the key to long-term success. Unless you choose to buy low-risk, low-return products, losses are usually unavoidable.

9. Don’t listen to the ‘noise’ Your strategy may be influenced by trading predictions on stock blogs, newspapers, and other media, but it’s best to ignore any speculation.

You’re likely to get better results by doing

The more you step back and look at longerterm trends and realise that normal market behaviours fluctuate, the better.

Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.

No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction, or investment strategy is suitable for any specific person.

The author does own shares in some of the securities mentioned.

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MARKET INSIGHTS

Will Inflation Be Back?

Over the Covid crisis, governments racked up huge debts and central banks printed money. Now there’s a risk that we’ll see inflation making a comeback, writes Andrew Kenningham in London.

Inflation has come down sharply since the pandemic hit in the first months of this year.

which is likely to be for a long time yet – inflation will stay low.

The inflation rate is currently just over 1 per cent in the US, close to zero in Canada and the UK, and is actually negative in the euro-zone and Japan.

Looking beyond the pandemic, though, there are reasons to think inflation may rise.

Of course, economic slumps usually cause inflation to fall, so this is no surprise.

One reason for this is that the prices of commodities fall as economic activity slows. For example, the price of Brent crude has fallen from US$70 to US$40 per barrel since the beginning of the year, which has caused the price of gasoline in the US to fall by nearly 20 per cent.

Prices of hotel accommodation and airfares have also plummeted, for obvious reasons.

Not all prices have fallen Granted, not all prices have fallen. It is generally more expensive to get a haircut now than it was a year ago. And with more people working at home, the price of furniture and garden plants has shot up.

The prices of second-hand cars have risen in many countries as people try to avoid public transport. But, in general, so long as the economy remains weak –

For a start, the activities of central banks are directly boosting the money supply, as money is being created electronically in order to buy government bonds.

This money allows the government to transfer funds to households, for example, through the schemes which were adopted during the lockdowns.

Risk of hyperinflation An increase in the amount of money in circulation usually causes prices to rise. In extreme cases it can lead to hyperinflation. For example, the inflation rate in Germany was once over 100 billion per cent!

Admittedly, the links between money growth and inflation are not automatic. Firms and households will want to hold higher savings just in case for some time because of uncertainty about the pandemic.

And even if households do spend the money, companies should be able to increase their output soon to meet this demand, rather than raising prices.

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Once output gets back to normal, the extra demand could fuel inflation. Much will then depend on how central banks respond.

But once output gets back to normal, the extra demand could fuel inflation. Much will then depend on how central banks respond when and if they see that inflation is picking up.

To nip in the bud any increase, they could raise interest rates or reverse the rise in the money supply through a process of ‘quantitative tightening’, that is, selling some of the bonds they’ve bought.

But there is no guarantee that they would do that.

Central banks may want to contain inflation but make an error.

It could be accidental The last period of high inflation in major developed economies, during the late 1960s and 1970s, was accidental, rather than a deliberate strategy.

Inflation reached over 10 per cent in most advanced economies in the late 1970s, and as much as 25 per cent in the UK. Alternatively – and this is perhaps a bigger concern – governments might try to engineer more inflation.

Inflation would make it easier for governments to pay off their debts, because it would increase the nominal amount of taxes they receive, while the value of the debt outstanding wouldn’t change.

To achieve high inflation, governments may put pressure on central banks to keep interest rates low, either by appointing more compliant central bankers or by changing the central banks’ mandates.

It’s true that monetary policy was passed on to independent, inflation-targeting central banks in the 1990s precisely to prevent governments from allowing inflation to rise. New Zealand was the first country to make this change, in 1990.

But the current inflation-targeting regimes are not set in stone.

The Fed changed tack The US Federal Reserve has recently made a subtle change to its goals and now tries to control the average inflation rate over several years; this means that its policymakers should tolerate an overshoot of the 2 per cent target.

Some fear that this could prove to be the thin end of the wedge.

Inflation risks are particularly high in countries where central banks are vulnerable to political pressure, and where government debt burdens look hard to sustain. This is often the case in emerging markets.

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Among advanced economies, inflation risks are probably highest in the US and perhaps the UK, where governments might be more tempted to run bigger fiscal deficits after the crisis.

Risks are lower in Japan and the euro-zone because these economies have had very low inflation for many years.

Inflation can get stuck When people expect inflation to stay very low, it can get stuck at a low level. So, it’s possible that later this decade there could be a period of divergence in inflation rates in the major developed economies not seen since the early 1980s and early 1990s.

For now, I still think it’s more likely that the inflation rate will remain low in most countries, even after the pandemic has passed.

But it would be foolish to ignore the possibility that this decade sees inflation become a serious problem for the first time since the 1980s.

Above: Piles of German money in a Berlin bank during the post-World War I hyper-inflation. In 1923 an American dollar was worth 800 million German marks.

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LIC REAA 2008

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of a “ Days 9% term

deposit are well behind us ”

M I K E TAY L O R Execut ive Dire ct or, Foun de r & CEO

This decade it appears we are entering a phase not previously seen in history, when the cost of borrowing approaches zero and in many countries is negative.

In Europe, interest rates have been negative for some time, and it’s not uncommon to take out a residential mortgage at a rate close to zero. In Switzerland, you must pay the bank to have money on call. In the last two decades the average 1-year term deposit rate in New Zealand has ranged from nearly 9% in 2007 to the current low of around 1.25% in 2020. It shows investors had it easy in New Zealand, and pre-GFC didn’t really need to take any risk at all to earn a modest return.

So how do we navigate this environment and what are the alternatives to a term deposit? If you are used to the stability and security of a term deposit then venturing directly into other asset classes such as property, shares or fixed interest all carry more risk, and the size of that risk can vary greatly. In my opinion, perhaps the best alternative for savers is a conservative fund. A typical conservative fund, such as Pie’s, aims to be lower volatility and to beat the returns provided by term deposits, while still being lower-risk than other funds like growth funds.

Pie’s investment team keeps a close eye on market conditions as part of our active management strategy, which helps us build wealth for our clients.

Boutique, bespoke, for you.

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

Inve s t me nt Ma na g e me nt

PIEFUNDS.CO.NZ

To download the Product Disclosure Statement and Statement of Investment Policy and Objectives, visit piefunds.co.nz, companiesoffice.govt.nz/disclose. Past performance is not a guarantee of future returns.