JUNO Winter 2020 Recovery

MARTIN HAWES How to invest in a recession

CAMERON BAGRIE What lies ahead for New Zealand

LIFE EXPECTANCY Could you outlive your savings?

• PROPERTY • SHARES • KIWISAVER • YOUR JOB

SPECIAL EDITION

9 772422 894000

NZ$9.95 INC. GST

RECOVERY Why losing money hurts • Put a rocket under your working life • Home office style

Navigating the winds of growth

When driving returns, it matters who drives.

Sure, lots of people can drive, but only a few can race. Even among professionals with millions of dollars behind them, some won’t get to the front, and some won’t even finish the race. It’s the same with company leadership. Skill, experience, passion and ability really do

come together to make something more than the sum of the parts. So when we invest in companies, we invest in the senior team running them. And if the people change, we review our investments and exit if we need to. It’s that important.

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

Contents IN THIS ISSUE REGULARS

10. JUNO Exchange

32. Super CVs

We review the winter ʻHow to Get Richʼ reader event.

Top tips to make your CV stand out and sharpen up any future job application.

12. What We Like A selection of the hottest products from around the country.

14. Essentials These luxury products will add style to your work-fromhome setup.

66. Book Reviews JUNO reviews two latest hot reads.

34. Earn More on the Side Want to earn more money? A side hustle could help you bring in more income to reach your goals.

36. Time to Look at Your Fund Type Is your KiwiSaver money in the right type of fund for you?

We give some easy ways to help you decide.

38. Will You Outlive Your Cash?

67. JUNO Junior

Is there a magic way to work out how long youʼll live for?

Brenda Ward explains how to work out how much to save.

Get your kids learning about money with our fun, interactive page to help improve financial literacy.

41. Sort Your Spending

YOUR INVESTING Personal Finance

18. Recover From a Downturn Financial adviser Martin Hawes explains how to get your money through the latest market dip.

22. Why it Hurts When Your KiwiSaver Drops When your KiwiSaver balance dips, itʼs not a real drop. So why does it cause us pain? Claire Connell finds out.

24. How to Invest During a Recession Don’t let a bear market hold you back, writes Kristen Lunman of Hatch.

26. Habits of Successful People Brenda Ward looks at some common behaviours of overachievers.

30. Win at Work Dr Sven Hansen explains the key skills that will help you be more successful at work.

2 JUNO |

WINTER 2020

Did the lockdown make you reassess your spending?

We have easy tips to help you review your budget.

42. How to be a Conscious Spender Want to become a more mindful shopper? You can change your mindset with some easy new approaches.

46. Jake Millar’s Unfiltered Great leadership tips from Annette Presley, the co-founder of Slingshot and CallPlus.

48. When You Make a Loss PwCʼs Mark Russell says your investments may have made a loss this year. Hereʼs what you can do.

50. Business Vision We showcase innovative Kiwi companies making their mark on the world.

52. Lessons to Learn The economic dip caught many of us by surprise. What can we learn from the experience?

68. Money Podcasts Sick of the books youʼre reading and want to put your time to better use? A personal finance podcast could be the secret.

2020 drinks international world’s most admired wine brands Craggy Range - Number 28 order online now - www.craggyrange.com

58

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74 36

YOUR INVESTING

YOUR INVESTING

Property

Market Reviews

54. How to Save Your Rental

71. What is Insider Trading?

Tips for property investors to help keep heads above water in this tough time.

The Financial Markets Authority’s Sarah Vrede explains the rules around insider trading.

57. The Perfect House

72. Going Up, Going Down

Brenda Ward explains how you can buy a home with the most in-demand features.

Economist Cameron Bagrie looks at how New Zealand is faring.

58. Should you use a Property Manager?

74. Oil Hits Troubled Waters

Pros and cons for using a property manager or managing your rental yourself.

Oil’s been big news in 2020, but Chris Smith says the industry was already under pressure.

62. Will the Housing Market Crash?

78. Long Road Ahead

What will happen to house prices in New Zealand given the state of the economy?

How will European markets recover to a new normal? Andrew Kenningham explains.

4 JUNO |

WINTER 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.

Navigate the nerves and overcome the turns of the markets with our team right here in Auckland.

FX | Indices | Commodities | Shares | Cryptos

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With derivative products you could lose more than your deposits. You do not own or have any interest in the underlying assets. Investing in derivative products carries significant risks.

Seek independent advice and consider our PDS at cmcmarkets.co.nz when deciding whether to invest in CMC Markets products. CMC Markets NZ Limited (CN 1705324).

Published by: Brenda Ward JUNO investing magazine, Level 1, 1 Byron Avenue, Takapuna, Auckland, or PO Box 331079, Auckland 0740. junoinvesting.co.nz

Your Savings in the ICU Mike Tyson once said: “Everybody has a plan until they get hit. Then, like a rat, they stop in fear and freeze.”

If this was you in the past few months, frozen in horror as you watched your investments shrink day by day, you’re not alone. It can be gut-wrenching. Now you might be worried about how to get started again.

As many of our writers know, share markets and property markets have taken some big hits over the decades, but they do recover.

Those who lived through them often invest more cautiously.

In fact, columnist Mary Holm recently noted that few of us had ever seen our KiwiSaver balances drop. She wished there were a little bit of a drop after years of booming markets. “A little bit of a drop,” she said, stressing the ‘little’.

But the message in this issue is you can get up and fight again.

Founder of the Resilience Institute Dr Sven Hansen talks about how to put a rocket under your working life.

Financial adviser Martin Hawes talks about, like Tyson, sticking with the plan for your investments.

Property investor and developer David Whitburn tells Kiwis how to hang onto those rental properties.

Economist Cameron Bagrie goes one step further: he sees opportunities out there for those wanting to buy their first home.

We hope this magazine will answer your questions and help you through this period to find a better financial future.

She thought we’d be smarter investors if we experienced this. Of course, none of us foresaw the Covid-19 impact.

Brenda Ward JUNO Editor

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

Founder Jacqueline Taylor

Deputy Editor Claire Connell – claire@junoinvesting.co.nz

Printer Crucial Colour

Senior Designer Mark Glover

Distribution Crucial Colour and Marketing Impact Limited

Executive Chairman Mike Taylor

Retail Distributors Gordon & Gotch

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.

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

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Meet some of our

Contributors

CAMERON BAGRIE

NAOMI BALLANTYNE

ASHLEY CHURCH

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.

Naomi has 38 years’ experience in the New Zealand life insurance industry. Naomi founded and is now the managing director of Partners Life.

Ashley is the former chief executive of the Property Institute. A media commentator on property for over 20 years, he now writes on behalf of OneRoof.

KRISTEN LUNMAN

ANDREW NICOL

MARK RUSSELL

Kristen directed New Zealand's first fintech accelerator, and is now the general manager of investment platform Hatch, launched after interviews with many millennials.

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

Mark is a partner in the Financial Advisory Services team at PwC. He specialises in the tax treatment of investments and managed funds such as KiwiSaver.

8 JUNO |

WINTER 2020

MARTIN HAWES

ANDREW KENNINGHAM

Sharon is the new executive officer of the New Zealand Property Investors’ Federation.

Sharon has been a property investor since 1998.

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

Andrew is the chief Europe economist for Capital Economics.

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

CHRIS SMITH

DAVID WHITBURN

SARAH VREDE

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.

David is a lawyer and pastpresident of the Auckland Property Investors’ Association, author, and is a professional property investor and developer.

Sarah is the director of capital markets at the Financial Markets Authority. She has more than 20 years’ experience in financial and capital markets.

WINTER 2020

|

JUNO 9

Ashley Church Headshot photo: Ted Baghurst/NZME

SHARON CULLWICK

REGULARS

How to Get Rich When JUNO editor Brenda Ward was a teenager, she interviewed a man who had a mansion, a Rolls-Royce, a huge boat, and house staff. She told the Autumn JUNO Exchange event she was disappointed to find that he didn’t really own the car, house, or boat.

They were owned by the bank and he simply paid interest for them each month.

He advised her to borrow to feel rich.

She said she didn’t take his advice, and instead recommended the advice of the experts speaking at the event.

Sometimes money isn’t what motivates you – it’s people, Naomi Ballantyne told guests.

The chief executive of Partners Life insurance company sold the company she founded to an international corporation, then quit when someone suggested she should cut down her ‘units’.

Those units were the people who worked with her, she said. At that moment, she realised she no longer wanted to be part of an organisation that saw people that way.

Newspaper columnist, radio commentator, author and money whizz Mary Holm talked about the ways ordinary people can get rich.

You do need to take high risk to get high returns, she said. Don’t trust anyone who tells you they have a risk-free investment for you that has a great return.

Money expert Dr Claire Matthews, of Massey University, releases a report each year that explores how much money people really spend when they stop working.

She said you don’t need to be rich to retire. Every time the expenditure report comes out, she gets emails from people who live well, but simply, on NZ Super.

But if you want more choices, she says you should invest a lump sum so your returns will cover the gap between NZ Super and the lifestyle you want.

Matthews said none of us knows how long we’ll live, so it pays to assume you’ll live to at least 85 and then allow enough money to cover a few more years.

Thanks to our wine sponsor Craggy Range, beer sponsor Renaissance Brewing, and Good Buzz kombucha for supporting this event.

10 JUNO |

WINTER 2020

REGULARS

What We Like A showcase of the hottest products that are the talk of the town.

Market Set to Sparkle An alcoholic drink made from sparkling water and cane sugar has turned out to be a real hit for a new Kiwi company.

Native Hard Sparkling is part of a new trend of ‘seltzer’ drinks – sparkling water-based alcoholic drinks with less sugar than standard drinks.

Seltzers have seen huge growth in the US market where consumption is expected to triple by 2023, and that market demand is expected to reach New Zealand shores.

Native Hard Sparkling co-founder Guy Hobson says the company launched last year, in response to the demand for ‘seltzer’ drinks in New Zealand.

The founders wanted to do some good in the world. A portion of its profits are donated to charities around New Zealand, mostly supporting the country’s fauna and flora.

Hobson says the odourless, flavourless alcohol base is made from fermented and distilled cane sugar. The alcohol base is combined with fruit concentrates and filtered sparkling water.

Sleep on a Good Idea

realised that dental floss can be tricky to use, to get it into the right places.

They designed the Waterflosser to make it easy to clean between teeth. It’s especially helpful for those with braces or dental work like permanent or temporary bridges and implants.

It’s available in either the cordless version ($129) or plug-in model ($149), in black or white.

If you’ve ever struggled to get a mattress up a narrow stairway or man-handled your bed into a lift, you’ll know there has to be a better way.

And Melbourne-born entrepreneur Ringo Chan has found it. It’s a mattress in a box.

His Ecosa mattress is delivered compressed into around 10 per cent of its volume. When the box is opened, the memory foam expands the mattress back to its original size.

Chan says he’s already sold 21,000 mattresses to Kiwis and says his best customers are urban millennials living in flats and apartments.

Customers can trial the mattress at home for 100 days. Any returned products go to local families in need.

You can adjust the firmness to your taste. Three layers can be interchanged to adjust the firmness.

Chan says the next challenge for the New Zealand market is moving to same-day delivery. He says as his volumes increase, he can start operating from multiple warehouses around the country.

Available in all sizes, Mattress in a Box ranges from NZ$900 to NZ$1,550.

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Revolution in Oral Health Step up your oral health with the latest technology in home dental care.

The 360PRO Waterflosser uses water to floss your teeth, like a little waterblaster, targeting the spots that really need it.

Neglecting flossing between your teeth can lead to tooth decay, plaque and gum issues.

But the experts at Kiwi company 360PRO 12 JUNO |

WINTER 2020

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WINTER 2020

Recovery (noun)

The act or process of returning to a normal state after a period of difficulty.

Merriam-Webster Dictionary

“Though nobody can go back and make a new beginning, anyone can start over and make a new ending.”

– Chico Xavier, Brazilian philanthropist

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

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PERSONAL FINANCE

Market plunges have been putting a dent in Kiwis’ investments. Financial adviser Martin Hawes talks about how to get your money through the coronavirus crash.

S&P 500 Volatility During the GFC, from 1 Sep 2008 to 1 Jan 2009 (Graph shows six ‛bounces’) 1400

1300

1200 S&P 500 Price Level

Recover From a Downturn

1100

1

#

Bounce start

Bounce end

Trading Size of days bounce

1

17 Sep 08

19 Sep 08

2

9%

2

10 Oct 08

13 Oct 08

1

12%

3

15 Oct 08

20 Oct 08

3

9%

4

27 Oct 08

4 Nov 08

6

18%

5

20 Nov 08

28 Nov 08

5

19%

6

1 Dec 08

8 Dec 08

5

11%

1000

900

Should you keep investing in a downturn?

I’ve had a couple of calls from clients who I’ve recommended a portfolio to six months ago, and who’ve been drip-feeding into that fund – and now this has happened.

They’ve asked exactly that question: should they keep on doing it?

And the answer’s absolutely yes, because it’s at times like this, when you do have volatility, that you’re buying cheap shares.

It makes no sense, having purchased those shares when markets were expensive, to stop buying them when they’re cheap.

When I’m working with a client, we’ve already put our emergency fund aside – I always do that with clients – but if somebody’s lost their job or they don’t have much in emergency funds, they probably have to build that up before investing. So, safety first.

2

3 4

800

5

6

700

1 Sep 08

1 Oct 08

1 Nov 08

1 Dec 08

1 Jan 09

Source: Goldman Sachs Global Investment Research, data correct as at March 26 2020

Where’s the bottom?

I do not believe the market volatility is over.

If you look at the chart above showing share market volatility in the Global Financial Crisis (GFC), I think we’re seeing that bounce at number one, maybe just like the GFC. If you look at the number four, anyone buying in the dip at the bottom there must have thought they’d done really well, but they hadn’t.

For a few weeks, it’s fantastic when there’s a bounce. But then came a very long slide down to five, which actually is the bottom.

I think that’s the point, markets have storms.

It’s virtually impossible pick the absolute bottom, so you need to make a series of purchases, over a three-month period, or a six-month period, and then be happy with the fact that you’ve bought value.

You may not have got the best value, but you’ve got value.

WINTER 2020

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JUNO 19

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

“It’s at times like this, when you do have volatility, that you’re buying cheap shares.”

How much risk?

If you take, say, a 65-year-old, you’d often say that you might want to lower risk at that age. That’s a fairly easy message to sell now, but it wasn’t easy to sell when we go back to January. But they’re going to be invested for probably another 25 or 30 years.

A lot of people, when they get to retirement age, won’t necessarily cash up their KiwiSaver account. Some people do a partial withdrawal. Some people do none at all, and just use it as their investment account in retirement.

So, many of these decisions are a matter of judgement. You’ve got to weigh up a whole bunch of factors: • Time is important, but it’s not the only factor.

• Consider your capacity to withstand a big economic shock. Take somebody who’s a doctor or a lawyer. Chances are they can continue to earn income in most situations, so they’ve got a good capacity to withstand shocks.

• People who have income replacement insurance as well, are the other ones who are likely to be fine.

• And the other factor is the psychological one. I’ve seen a lot of people in the past 20 JUNO |

WINTER 2020

few months who’ve been very worried about their portfolio, and they’ve watched their KiwiSaver balance drop, and that’s really worried them. They thought it was like a savings account, but it’s not – it’s volatile. I’d be setting up those people in a portfolio that’s a bit less risky.

If you’re a growth investor and you’re in your late 50s, or early 60s, I’d say you should have been moving to becoming a balanced investor. Maybe later on at 70, go into a conservative fund, depending on your situation.

A few people I would have at retirement still in growth funds, because they’ve been through crashes before, they’re comfortable with that. They’re still working as a professional, and they plan on doing that for as long as they possibly can, so they might be still earning money from work for another decade or more.

For example, my father was still working as a doctor in his early 80s. If I can get away with it, I plan never to retire.

It’s horses for courses. You can be general with advice, but you’ve got to be careful with that, because there are exceptions to every rule.

Should you switch funds?

This is the first time that people in KiwiSaver have been tested by a major crash.

KiwiSaver started in 2007, but nobody had much money in their KiwiSaver account back then, so they didn’t care.

Now our balances are NZ$20,000 or more.

Some people have quite high balances, and this is their first experience ever of having an investment portfolio in a big crash.

The next time we go through this, I think there will be far fewer people switching out – and I hope fewer people panicking – because they will have set it up correctly at the beginning.

I encourage people to use Sorted.org.nz’s ‘Investor Kickstarter’ tool. Just answer a few questions and it’ll tell you the kind of portfolio that could suit you.

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. This article is general in nature and not personalised advice.

JUNO ranked #1 for performance We're proud to say JUNO Growth & Balanced funds have officially been ranked as top performers for the last 12 months, according to the latest FundSource results* below:

$ JUNO’s returns* +10.3% (Growth fund)

Industry average returns* -4.06%

JUNO Growth and Balanced funds have been ranked as #1 in their risk category for the last 12 months to 31 March 2020*.

JUNO Conservative fund ranked at #2 in its risk category for the last 12 months to 31 March 2020*.

We put these strong results down to our active investment team (real humans to help manage and protect your KiwiSaver money), and our low fees (less money taken out of your account, means there's more left to benefit from returns).

*Based on FundSource figures for the last 12 months to 31 March 2020. Image represents JUNO's Growth Fund return (10.3%) compared to the industry average Diversified Growth fund return (-4.06%). Figures are before tax. Other providers’ figures are after fees, but ours are before, due to our monthly fixed fees. Subtracting our average annual member fee of about 0.40% would not change the Growth and Balanced fund 1st place results for the 12 months to the end of March. Conservative would be in 4th for the 12 months to the end of March (fees included). Past performance is not an indicator for future returns. Pie Funds is the issuer. The Product Disclosure Statement is available at www.junokiwisaver.co.nz

(Growth fund)

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

Why it Hurts When Your KiwiSaver Balance Drops KiwiSaver balances around the country have dropped. It isn’t great to see your balance reducing. Even if you don’t plan on using your money for years, you probably still felt some impact, writes Claire Connell.

Many of us know that investment involves ups and downs. And we know that investment always involves some degree of risk. But the coronavirus outbreak meant many KiwiSaver balances dropped dramatically, and quickly. Why does it hurt so much to watch?

It’s called loss aversion Loss aversion is a theory about what causes people to make decisions, especially financial decisions. The theory says most people care more about losses than they do about equivalent or greater gains.

For example, imagine you’re given a choice.

You can choose to flip a coin and if it’s heads you win $10 and if tails you lose $2.

Or you can choose not to flip the coin.

Loss aversion means many people choose not to flip the coin because they’re more focused on losing the $2 than on the opportunity to get a much higher amount (the $10).

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In real life, this means we pay much more attention to the pain we feel when our KiwiSaver balance drops, than we do to the satisfaction of our balances rising.

Most important, this feeling often means people make panicked, poor decisions about selling their investments or shifting them somewhere else to avoid future losses.

But it’s not a real loss If your KiwiSaver balance has reduced lately, any losses are only locked in if you withdraw your money over that time, or move it to a more conservative fund. Until then, it’s what experts call a ‘paper loss’.

Emotion is high Many of us know that during a downturn, we shouldn’t touch our investments. That’s even though at times we really want to move them or sell them.

But often the facts we know about investing aren’t as powerful as our emotional reaction to watching our balance fall. Often people sell their shares or change to a more conservative fund during a downturn, because they panic, or are scared.

If you’re a KiwiSaver investor, it’s important your money is in the right fund for your investment time frame and your confidence with investing.

Then, experts usually say it’s best to stick to this strategy, and keep calm and carry on through the downturns. Avoid any emotional decisions based on what you read online or in the media.

You’ve worked hard for that money You might also be feeling quite negative because you’ve worked so hard to build up your KiwiSaver balance.

You may have put real effort into finding out how KiwiSaver works and how to use it best. You might be contributing a lot of money to it.

But seeing your returns go up and down over the years is all part of your investing journey. You accept the ups and downs of the share market, in return for hopefully better gains over the long term. The markets will pick up again, but it will take time.

If you’re feeling stuck, give your KiwiSaver provider or financial adviser a call.

They’re there to help you make sure your investment strategy is right for you.

This article is general in nature only and has not taken into account any particular person’s objectives or circumstances. We recommend you speak with an independent financial adviser.

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

A bear market and a recession can be a challenging environment for investors – but it can also present good opportunities for some.

24 JUNO |

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ADVERTORIAL

How to Invest During a Recession You might be in two minds about buying shares, but don’t let a bear market hold you back, writes Kristen Lunman of Hatch.

The coronavirus outbreak sent share prices from New Zealand to New York tumbling, sparking a wild ride over the two months or so, and a bear market.

If you’re not familiar with the term ‘bear market’, it refers to instances when there’s a share market decline of 20 per cent or more from recent highs.

A bear market and a recession can be a challenging environment for investors – but it can also present good opportunities for some.

If your income or job stability hasn’t been affected by the Covid-19 outbreak and you’ve got spare money at your disposal, you may be keen to take advantage of the opportunity.

Even the most cool-headed may wince at market dips, but eventually could be on the hunt for quality deals.

From bargain-hunting to keeping calm, here are some tips to consider whether you’re an old hand or a newbie keen to dip your toes in a bear market.

1. Invest in what you know and understand The investing principles of diversification, or spreading your risk over a number of asset classes, and a long-term view still apply in a bear market. So, it’s important to do your research.

A good place to start when you’re investing in shares is in a company that you know.

Think about the brands you buy, or a product that everybody loves. While there are no guarantees with share-picking, if you love a brand and your friends or colleagues do too, then there’s every chance the company behind it is successful – or has the potential to be.

When you buy shares, you’re buying a personal stake in that company, so you’re essentially backing the future of that company.

It’s a good idea to monitor company and earnings announcements. Also, keep an eye out for interviews with key people in the business.

2. Invest in quality companies when they’re on sale If you’re a long-term investor confident in the strength and potential growth of the companies you invest in, you’ll tend to look at share price drops as a ‘sale’.

By a sale, I mean there’s a chance to buy shares you believe in at a discounted price.

Sometimes, it’s called ‘buying the dip’ because investors are on the lookout for good quality shares that are trading at a discount.

It’s important to differentiate between companies that have seen their share price fall as a result of everything being dragged down in market panic, and those that have dropped because they’re on shaky ground heading into a recession.

To thrive on the other side of a dip, it’s a good idea to invest in high-quality companies that have strong balance sheets, low debts, and cash on hand.

Corrections, bear markets and recessions will come and go, but great businesses are resilient.

3. Consider dollar-cost averaging Investing the same amount of money at regular intervals (like each time you get paid) – weekly, fortnightly, or monthly – is called dollar-cost averaging. That way, you won’t be tempted to give in to your emotions when the markets dip or surge.

When you commit to contributing regularly, you won’t even have to look at what prices the shares are. Dollar-cost averaging is particularly powerful in a bear market, because you are usually buying more shares for less money, compared to recent market highs. It’s a way to balance out your risk.

4. Look to the future It’s hard to know how long a bear market will last, and currently, we just don’t know how long the Covid-19 crisis will go on for, or how much it’ll hurt the global economy.

So, as a general rule, don’t invest in a bear market with the hopes of getting rich quick.

Instead, take a long-term approach to investing, known as ‘buy and hold’, and assume that any shares you buy now are with companies that you’ll continue to back for many years to come.

5. Get off the sidelines Start by doing something small today.

Watchlist the brands you love or exchangetraded funds (ETFs) in sectors you’re familiar with, and when you’re ready to invest, you can begin with a small amount and then build your confidence as you go.

This article contains general information only and is not personalised advice. Before investing in any financial product, seek independent financial advice.

Why Hatch?

Hatch is not your dad’s investment platform - our mantra is growing your money on your terms, by investing in the things you believe in.

Kiwis are unique individuals who have different needs, desires, and goals, so we let you build an investment portfolio that reflects what you care about and what you believe in.

We’re a fresh new way for you to invest, at your own speed, in your own way, to create a portfolio that truly reflects you.

Why the US share market?

The US share market is the biggest share market in the world and makes up almost half of the total global share value.

Our homes, jobs and most of our investments are in New Zealand and, while we love this country, that’s a lot of eggs in one tiny basket.

We believe a smart investment portfolio is a diversified one, and with Hatch, you can invest in the world’s most successful companies and recognisable funds.

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Habits of Successful People Just a few daily habits help the world’s top businesspeople get to the top – and stay there. Brenda Ward looked at some common behaviours of overachievers.

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They network with other successful people

1

Microsoft co-founder, Bill Gates, talking about US superinvestor Warren Buffett: “Some friends challenge you about things you’re doing, and that level of intimacy is great.”

They think big Peter Beck, RocketLab founder: “The definition of success seems to be ‘We’re selling in Australia now’. That’s the definition of failure. We’re only selling in Australia now, why aren’t we selling in the UK and Europe, and actually, take it a step further and why aren’t we the most dominant in that particular industry in the entire world?”

3

They read books Billionaire property developer Sir Bob Jones: “I’ve got about 20,000 books and it’s my principal passion…

I’m called a businessman. The rest of the time, if you judge me by my occupation, I read. I read about 12 hours a day, I love it.”

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4

They meditate Arianna Huffington, founder of The Huffington Post, meditates regularly: “Meditation is not about stopping thoughts, but recognising that we are more than our thoughts and our feelings.”

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6 5

They exercise

They’re always working Jake Millar, CEO of Unfiltered.tv: “Guys such as [Villa Maria founder] Sir George Fistonich and [businessman] Eric Watson are always on. I’ve been woken up by 3am conference calls with Eric Watson before – and that was totally expected of me in terms of the deal we were looking at, and so it should have been.

You’ve got to be fully committed.

You can’t get lazy.

It’s 24/7. Business is the ultimate sport.

It’s always on. As soon as you get lazy, you’re screwed.”

Mark Zuckerberg, founder of Facebook: “Staying in shape is very important. Doing anything well requires energy, and you just have a lot more energy when you’re fit. I make sure I work out at least three times a week — usually first thing when I wake up.

I also try to take my dog running whenever I can, which has the added bonus of being hilarious, because that’s basically like seeing a mop run.”

7

They seek great working partnerships Miguel McKelvey, co-founder of WeWork, of his business partner Adam Neumann: “In every partnership, that would probably be the question: ‘What do you have?’ ‘What do you bring to the table?’ And, ‘What are you missing?’ ‘What are you not able to bring that is essential to being successful?’.”

8

They get up early Richard Branson, CEO of Virgin Group: “I have always been an early riser. Like keeping a positive outlook, or keeping fit, waking up early is a habit, which you must work on to maintain. Over my 50 years in business I have learned that if I rise early, I can achieve so much more in a day, and therefore in life. Getting up and at it early gives me time to get on top of things, and chart my day effectively.”

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How Insurance Will Change Partners Life chief executive Naomi Ballantyne has led insurance companies through many crises. She explains what’s likely to happen as we battle the coronavirus, and how it could affect you and your insurance policy.

It won’t be this virus that sends people running to make claims on their insurance policies. It’ll be the side-effects of shutting down our economy.

Fewer of us are driving, playing physical sport or doing risky work. This will play a part in reducing the number of accident claims.

I’ve been in the insurance industry for 38 years now, so I have a unique experience in leading life insurance companies through recessions.

We also believe that the value of a job will become increasingly clear to New Zealanders. They’ll be going the extra mile to keep their employment, ignoring any impact on their health.

First, the big impacts of Covid-19 on our business won’t be from the virus, or deaths, they’ll be the results of the government’s pandemic response.

This is what I expect, assuming economic restrictions are completely lifted within six months.

Stress and job losses Facing fears about their jobs or a redundancy, lots of Kiwis will feel stress, anxiety and depression. I expect a big increase in stress-related insurance claims.

People who are already claiming for physical reasons may also face mental health issues which may worsen their disability, or may find their access to rehabilitation programs difficult during lock-down, prolonging their disability.

They’ll need help for longer.

Fewer accidents On the other hand, we expect one of the unintended side-effects of lock-down will be that the number of serious accidents will fall.

www.partnerslife.co.nz

This is likely to reduce the number of people claiming for repetitive strain injuries or workplace stress. It’s my guess that people will want to keep working and not be a burden on their companies.

Redundancy claims The number of redundancies as a result of Covid-19 has increased sharply, leading to an increased number of redundancy claims.

And I expect the average time people stay redundant will also increase as people struggle to find work.

Many people don’t know that policies such as income protection insurance, mortgage repayment cover and household expenses cover don’t cover you if you’re just facing financial difficulty.

Those are all disability policies so, if there is a health issue as a result of Covid-19, then those policies would respond, but they’re not unemployment benefits.

Unless you’ve bought a redundancy option under those policies, then the standard disability benefit only responds to disability and not to, ‘I’m out of work’, which is not the same thing.

Most companies are no longer offering new redundancy policies to customers.

And we wouldn’t suggest buying new medical insurance if you’re just looking to cover yourself from Covid-19, as treatment for the coronavirus is free through the public health service.

Holidays and suspensions If you’re facing financial hardship, most companies are offering versions of premium holidays or policy suspensions to help people who’ve lost a significant amount of their income. You will need

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to check with your Insurer as to their approach to these affordability options.

These are two different situations and it’s important to know the difference: • Some companies are simply suspending policies. There will be no premiums to pay but neither will you be able to claim during the suspension. Your cover lapses, but will be reinstated at the end of the suspension period when you restart paying premiums.

• Partners Life is offering a premium holiday. This offers you full cover for up to six months. After that time a policy suspension is then available if you should still need help to cover your policy premiums.

Effectively, a premium holiday is giving you up to six months’ free cover. We’d rather you took a break and resumed when you can afford it, rather than you lose your insurance cover.

I expect that customers who stay employed throughout the crisis are much less likely to allow their policies to lapse or swap providers. We’ve already seen fewer premium arrears and low lapse rates.

or upgrading cars, boats, or houses.

They start thinking seriously about their finances. As a result, they talk to advisers, and they follow through on that advice.

While lock-down caused an initial wave of panic, I do anticipate more demand among Kiwis who remain employed to get their insurances sorted.

A new view of insurance Throughout all the previous recessions I’ve seen Kiwis still buying insurance.

We certainly believe that this generation of Kiwis who are experiencing a worldwide pandemic first-hand, will never return to their pre-Covid ‘she’ll be right’ attitude towards life and health insurances.

New Zealanders do adult things during a crisis. They reduce their discretionary spend when they are worried, meaning fewer holidays, entertainment, shopping,

The outcome may be a big drop in the number of Kiwis who are underinsured, and they’ll be in better shape to deal with whatever happens in the future.

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Win at Work High performers have key life skills and habits that make them successful. Brenda Ward speaks to expert Dr Sven Hansen about what they are, how you can use them to be more productive, and how they can help you earn more.

Are you confident of getting a pay rise, being promoted, and being noticed for your hard work?

Or is it a struggle to concentrate, to stand out, and to get ahead?

Maybe you’re not focusing on the right skills, says The Resilience Institute’s Dr Sven Hansen.

He’s a sports science specialist who applies the psychology of winning to improving lives and businesses.

His recommended skills all apply across work, sport, your body, and your personal life. And they can be gamechangers.

Here’s how to boost your earnings power.

Flow If you want to earn more at work, grow your own business, or even earn more by investing, get your head around ‘flow’, says Dr Hansen.

Flow is an optimal performance state that could change your life.

“It’s where you’re feeling both challenged and that your skills are fit for the challenge,” he says. “When you enter these flow states, you can be five times more productive.

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or if you want to do some deep analysis, get into flow.”

How do you know when you’re in it? There are four features: 1. Thinking stops and your mind is quiet.

2. You can’t remember time passing.

3. It’s effortless or graceful. Even though you might be in a testing situation, it has a grace to it.

4. It’s extremely enjoyable, because you have a whole bunch of positive chemicals coursing through your body.

“Every single one of us can achieve that state,” says Hansen.

“Set meaningful challenges and then work out the skills you need to refine, to develop, to meet those challenges.”

Work in short, focused bursts of flow, with quick breaks to recalibrate.

Sleep It’s very easy to get sleep mixed up when devices shine blue light into your face all day and night, and our social lives keeps us awake longer. All human beings need seven to eight hours a night.

Some simple things can make a huge difference: 1. If you’re a ‘lark’, go to bed early and wake early. If you’re an ‘owl’, go to bed a little later, and wake up a little later.

2. Try to wake at the same time every day.

If you want to lift your productivity, never sleep in at the weekends. Wake just before the sun rises, so you get exposed to dawn blue light, to fire up your body.

3. Have a wind-down routine. Research suggests before sleep, you need about 90 minutes away from screens.

4. Make sure the room is cool, and avoid LED lights at night.

5. You need a good balance of deep sleep for health, and dreaming sleep for emotion, creativity, and embedding memories, says Hansen. If you go to bed too late, you’ll squeeze your dreaming time. This one simple piece of advice can be a life-changer, he says.

Tactical calm One quality that will get you noticed is what Hansen calls ‘tactical calm’.

“It’s the ability to be able to engage with a difficult, potentially high-conflict situation without losing your emotional steadiness.”

Find a way to calm yourself when you find yourself getting overexcited, angry, panicky or fearful.

The simplest way is to regulate your breathing, he says.

“Relax and exhale: just three breaths, with

PERSONAL FINANCE

long, slow, easy exhales. Lengthening your exhale slows your heart rate and activates the vagus nerve, the main nerve of your parasympathetic system.”

Experts suggest about eight minutes of tactical calm a day. Try breathing, yoga, mindfulness, or even just gardening.

“Tactical calm is key if you want to be productive, if you want to be effective with other human beings, if you want to make good financial decisions,” he says.

The more you practise, the thicker and faster your vagus nerve gets, and the easier it’ll become.

Focus When experts test high achievers, they find focus is one of the top factors for resilience.

See the full list on the right.

Focus is attention control – and multitasking is a bad idea, says Hansen.

It wrecks your quality of work, your productivity skills, and your thinking skills.

To excel at work, avoid distractions, emails, and work chatter, and really drill your focus on a single task.

And it’s ‘how’ you think. “We’re inclined to use biologically cheap thinking, ‘Type 1’ thinking, which is your gut response, because it doesn’t cost a lot of energy.

“But when you’re focused, you really want to be using more expensive thinking modes, which they call ‘Type 2’ thinking.”

Maths problems, for example, use Type 2 thinking. It’s detailed, focused and takes a lot of energy.

To boost focus, be calm, have a good night’s sleep, eat well, and do some exercise, says Hansen.

Keep emotions in check Just one emotional outburst can destroy months of hard work, says Hansen. Avoid compulsive, emotionally driven behavior, which can lead you to make a bad decision.

“If you don’t control your emotions, it’s very easy for them to hijack your productivity,” he says.

“The number one trap is anger. Anger is always better gently restrained. Fear or panic is the second, sadness or self-critical beat-ups would be third, and the fourth would be cravings.”

Many super-successful people derail themselves with one simple mistake, he says.

“They allow emotional cravings, impulses, to overwhelm their brilliance. The worst end up in jail.

“To be a successful person, whether it’s at work, or in your personal life, some

restraint will be required. People never forget that one lapse.”

Then, just do it!

Make small changes part of your day in a simple, repeatable way, says Hansen.

“We’re very good at knowing everything I’ve talked about here, but we’re not actually that good at doing it.”

Successful people work out routines, and automate decision-making, to get things done, he says.

What drives success?

The top 10 per cent of high performers have these as their top behaviours and mindsets: 1. Focus 2. Purpose 3. Fulfilment 4. Optimism 5. Vitality 6. Presence (living in the moment) 7. Decisiveness 8. Integrity 9. Assertiveness 10. Bounce (resilience) Source: The Resilience Institute, www.resiliencei.com

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Super CVs Christian Brown, general manager of Madison Recruitment, oversees five offices across New Zealand. He gives his top tips to sharpen your job application.

Many of us have been there – feeling overwhelmed when you’re writing your curriculum vitae (CV) and cover letter for a potential new job.

It’s hard to know what to focus on, what you should include and what you should leave out.

In short, keep it simple, relevant, and put the effort in.

Relevance is key Make sure your CV is relevant to the job you’re applying for. Nobody needs to know about your part-time babysitting role when you were at high school. I once saw a 22page CV. It was quite memorable – but not for the right reasons.

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Sharpen up your cover letter Don’t just repeat your CV. Highlight the reasons why you want the role, or why you like the organisation.

firms are spelled correctly.

Be specific about what you like. Talk about the organisation’s values or that you’ve been inspired by something you’ve seen in the media.

Ask a friend who has good attention to detail to read over it too.

Write your cover letter to the actual person who’s hiring. If you don’t know who it is, find out.

Put the effort in I get frustrated when some people say they’ve applied for 100 roles and haven’t got any. It’s because recruiters and people hiring know when they’re getting automated CVs. You know that person isn’t after that job, they’re just after any job.

Put in the effort. Don’t rush an application.

That’s where mistakes can come in. Be thorough, and re-read and re-check.

Spellcheck is your friend Use correct formatting and a good design and layout. Use full stops and bullet points correctly. Avoid creative efforts. Remember that you’re writing a professional document.

Don’t include every single detail The person interviewing you will probably have a good idea about what you’re doing in your current role.

If you’re a receptionist, you don’t need to write that your job includes ‘answering the phone’ – it’s a waste of time and space.

Talk about things you do over and above your role, that show you have skills other than those of the basic position.

Check, check, and double-check Make sure the dates align, and the names of

Little things really do show the difference between someone who has put in some effort and a once-over-lightly job.

Submit PDFs A Microsoft Word document often comes up with red lines for unusual spellings. These lines don’t look great, and it’s not as easy to read. Convert it to a PDF. Don’t include a photo or age This is quite a European style, and can open the door for unconscious bias. We don’t recommend people put their age or photo, or even ethnicity or religion, on any application.

Avoid copy and paste mishaps Avoid copy and pasting from job descriptions, because it’s usually obvious. If it feels like it’s a template cover letter, ditch it, because it will come across that way to the people hiring as well.

They’re probably reading through 15 or even 30 cover letters and CVs. Try to make it bespoke and add in the organisation’s name throughout the cover letter.

It will be time well spent. You’ll come across as having a genuine desire for the specific role.

Be selective in what you apply for Instead of applying for 10 roles, apply for the top five, and submit strong, tailored applications.

Really try to concentrate on having a better CV and application, relevant to the organisation. This approach is more likely to get you through the door.

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Investing for Recovery

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Interest-bearing bank accounts can help make your money work harder for you, says Andrew Ford, of Heartland Bank. He says if you shop around for a better rate, you could get a surprise.

Covid-19 has caused negativity, volatility and uncertainty, which have all had an impact on investors’ confidence.

However, now’s the time to make sure your hard-earned money is working harder for you, says Andrew Ford, Head of Retail at Heartland Bank, which was Canstar Savings Bank of the Year for 2018 and 2019.

“Many people want to have enough cash for three to six months as a buffer for emergencies.

“Holding this buffer in an interestbearing account, or in short-term deposits, can improve your return, while providing peace of mind.”

Low interest rate environment Low interest rates are here to stay, for at least the medium term. While these low rates are intended to boost the economy through reduced borrowing costs, it means lower interest on bank deposits too.

Reserve Bank statistics show that the average six-month term deposit rate reduced from 3.26 per cent in December 2018 to 2.63 per cent a year later.

“Rates have fallen further in 2020,” says Ford. “In June 2008, depositors would have earned an average of 8.45 per cent. This has effectively seen a 69 per cent reduction in income in a little over a decade.”

While bank deposit returns are lower now, they do address one key thing in the current environment – certainty. Knowing that you can lock in a return and receive interest every month or quarter is huge.

www.heartland.co.nz

So, what can investors do about it?

Make your money work harder for you Many people have their hard-earned money in bank accounts returning no interest.

If flexibility and accessing your money are important to you, Ford suggests you review your banking, and consider holding some funds in an interestbearing account to maximise your return.

Heartland Bank’s Canstar awardwinning Direct Call Account offers an attractive return and unlimited withdrawals to one account.

Shop around Ford suggests you shop around to find out the best rates available.

“To a certain extent, banks rely on apathy. It’s always worthwhile shopping around.”

Comparison websites like interest.co.nz make it easy to compare the different deposit interest rates.

Consider term deposits “If you don’t have a short-term need for funds, medium-longer term deposits can offer a significantly higher rate of return, which gives greater certainty and the ability to supplement your income.”

Heartland offers very competitive term deposit rates – with terms that range from just one month to five years.

Spread your money “Spread your savings across a range of different terms, so you have funds maturing regularly. For example, keep

some money on call and have term deposits for six months, 12 months and 18 months, so you know you always have funds maturing in the short to medium term.

“This lets you take advantage of more competitive interest rates as they come to the market,” explains Ford.

“Choose an interest option that suits your needs – compounding to grow your investment, or interest paid to complement your income.”

Negotiate Negotiation is a powerful tool when you’re shopping for term deposits. Many banks suggest their rates might be negotiable for higher balances, generally $100,000plus. But there’s nothing to stop you asking for a better rate for a lower amount.

Getting the best rate on your term deposit is key to making you extra money on long-term savings. You might be surprised at the savings rate you end up with. Don’t forget your business is important to the banks.

It is also worth considering seeking independent financial advice.

Visit www.heartland.co.nz to compare term deposit rates, and choose an account designed to optimise your savings. You can even watch your savings grow through the Heartland mobile app.

This information has been prepared without taking account of the needs, objectives or financial situation of any particular individual. Information provided is accurate as at 22 April 2020 and may change from time to time. Heartland Bank’s terms and conditions apply.

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Earn More on the Side Want to boost your income? A side hustle could be just the thing for you. Claire Connell looks at some popular revenue streams, and finds out the pros and cons.

Selling items online This one is a win, win, win. You’ll win by decluttering your home or garage of your unwanted items. You’ll make some extra cash. And then the person who buys your old gear gets a bargain.

If you have new, unused items, you can make decent money. TradeMe says its most popular categories are home and living, and clothing.

Just make sure you charge enough for postage and watch out for dodgy buyers.

Looking for ideas to boost your income? Pick from platforms that are part of the sharing economy or look at some tried and tested part-time jobs of the past, and you could be on your way to getting richer.

Airbnb a room If you have a spare room, consider renting it out short term. This can be a handy revenue stream if you’re happy to share your space.

For some, it might be a better option than having a flatmate there full-time. But there are pros and cons with short-term rentals too, so do your research first.

Check your insurance covers you for any mishaps and know what you are covered for. We’ve all read those nightmare stories in the media.

Creative work on the side If you’re skilled in websites, design, content production, or digital marketing, help smaller companies in your spare time.

Often small companies don’t have huge budgets, and might only want a few hours a week. The flexibility could work both ways too. Just make sure you’re being paid reliably.

Dog-walking If you have a bit of spare time and are an animal-lover, try offering dog-walking services. There are many companies set up in the main centres offering this service for pets owned by busy people.

Working for a legitimate company ensures you’ll be covered by employment law if any issues arise, otherwise try putting a flyer in mailboxes around your suburb.

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Ride-sharing driver or food delivery Uber, Zoomy and Ola make up the main ride-sharing market in New Zealand.

Then there’s food delivery services like Uber Eats.

Hot tips for a successful side hustle

Beware, you might not earn as much as you think after expenses, GST, tax and car maintenance costs are subtracted.

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Use your skills and passions. It goes without saying that it’s best to pick something you like. Don’t sign up as an Uber driver if you don’t like people or driving, and avoid babysitting if kids aren’t your thing.

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Pay your tax. If you’re side-hustling, do it legally.

Declare all your income.

Visit business.govt.nz for all the information you need to keep things legal.

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Time versus money. Don’t wear yourself out doing a fulltime job plus your side hustle. There’s more to life than work, so don’t give up all your spare time and make sure you have balance.

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Run the numbers. Weigh up the financials before you sign up to anything or launch in full steam.

Sometimes the time it takes you to set up and run a side hustle isn’t worth it for the small amounts you’ll make.

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Work smart. Ask yourself if it’d be better to get a new fulltime job that pays more, rather than waste time on a side hustle. Think carefully about what’s best for you, your goals, and lifestyle.

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It doesn’t have to be forever. You might not want to do dog walking three times a week for the rest of your life. But committing to a side hustle trial period of, say, six months could give you short-term gains, and buy you time to assess if you want to keep doing the extra work.

•

Do your research. If you’re about to join a company as a contractor, speak to other employees, or previous employees. It’s a good way to get insights into what working there is like, and if it’ll be right for you.

Speak to a few drivers from different companies first, to hear the pros and cons, and to get their tips on how to maximise your earnings.

If you’re prepared to work odd hours, drivers say generally evenings and nights are the busiest times.

Admin or accounts Like creative work, many small businesses need a helping hand when it comes to keeping their records in check.

If your day job is working in admin, accounts, payroll or financial records, you could pick up some extra work on the side. Word of mouth can be great for generating new work.

Babysitting The Baby-Sitters Club book range inspired generations of teens to start a side hustle looking after the children of friends and family.

There’s still merit in the idea – it can be an easy side-hustle to run on the side, especially if you can do after-school pick-ups.

First, it’s important you like children and it’s best you have experience with them.

The set-up costs are minimal. A valid firstaid certificate, covering children and babies, would be a good idea.

Completing surveys Online surveys can be a relatively easy way to make extra cash. Sometimes you’ll be paid in cash, points, or given vouchers for your time.

Online resource MoneyHub recommends i-Say, Valued Opinions, and Opinion World as the three most trusted sites. Beware of suspicious websites that may shortchange you.

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Time to Look at Your Fund Type You hear a lot about fund types and making sure your KiwiSaver money is in the right one. But how do you find the right fund for you? Claire Connell explains.

During the recent market downturn, you’ve probably heard financial experts speak of the importance of having your KiwiSaver money in the right fund. But what do fund types mean, and how do you find the right one for you?

What types of funds are there?

Funds can vary between providers, but usually there are three main types: Growth – Growth funds aim to provide you with capital growth – really making your money work hard for returns. If you’re in a higher-risk growth fund, usually with more shares in it, your money is more likely to move up and down with the highs and lows of the share market. This means you might see dramatic changes in your balance. A growth fund might suit you if you’re investing for 10 years or more.

Balanced – Balanced funds aim for steady capital growth from a mixture of shares and things like fixed interest, bonds and cash. The investment style is what the name says – a balanced approach, and would usually have fewer shares than a growth fund.

A balanced fund might suit you if you’re investing for five years or more.

Conservative – Conservative funds aim to preserve your money, with a less risky mix than aggressive or growth funds. Because the bulk of their investments are usually in fixed interest, bonds and cash, you’ll generally see fewer dramatic ups and downs. A conservative fund might suit you if you’re investing for under five years, for example, if you’re close to taking out your money for a first home, or retirement.

Generally, the riskier your fund is, like a growth fund, the better chance of higher returns over the long term.

Which fund is best for me?

When it comes to your fund type, the most important things are:

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How long will you have your money invested for?

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How comfortable are you with investing?

Avoid changing your fund type because of ups and downs in the market.

If you change your fund to a more conservative fund during a downturn, you effectively lock in the losses.

This means you won’t benefit as much from any bounce back in the market.

But there’s an exception But if watching your money go up and down makes you very worried, you have a few options. You can try to get used to the ups and downs, and the longer you’re invested, the more comfortable you’ll probably become with the dips.

Or you might not be in the right fund for your tolerance to risk.

If you’re not sure on what type of fund is best for you, speak to your KiwiSaver provider. They’re there to help you get the most out of your KiwiSaver money, and to help you be sure you’ve got your settings correct. Or speak to an independent financial adviser.

Get used to the ups and downs Some investors may have got a shock with the recent market downturn – for many, it’s the first time their balance has dropped sharply.

Because KiwiSaver is an investment, your balance will go up and down. This makes it different from a savings account. But ups and downs are nothing to be afraid or worried about – they’re a normal part of your investing journey.

This article is general in nature only and has not taken into account any particular person’s objectives or circumstances.

We recommend you speak with an independent financial adviser.

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Will You Outlive Your Cash?

The fear of outliving your savings can be greater than the fear of dying for some people. But how can you work out how long you’ll be retired for? Brenda Ward asks the experts if there’s a magic figure.

Saving for a goal like a house deposit or a car is relatively straightforward – you know roughly how much you need to save.

But saving for retirement is tougher. How much cash will you need to have invested to bridge the gap between NZ Super payments and what you need to live?

“Longevity is a real key issue for retirement, but the problem is, it’s still a huge unknown,” says Massey University’s Claire Matthews. She compiles the Retirement Expenditure Guidelines that help us plan using Kiwi retirees’ actual spending habits.

“The reality is none of us knows how long we’ve got,” she says. “It impacts how much we’ve got to save, but more particularly it does impact how long retirement is, and the amount of time you’re going to have to fund.”

We’re postponing retiring Retiring is a new idea. Until the 19th century and the pensions system, most people expected that they’d be working all their lives. Now we expect to stop work at 65 or soon after.

But more of us aren’t stopping at 65. Thirty years ago, just nine per cent of people over 65 were working. Today, Statistics NZ says 38 JUNO |

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more than 20 per cent of people over 65 are employed, and that number’s rising.

With the number of people whose finances were, or will be, affected by the Covid-19 downturn, we may see those working on increase even more, as fewer older Kiwis are able to retire comfortably at 65.

Now, Urs Rohner, chairman of the Credit Suisse Group board, says in the paper Rethinking Retirement: “Retirement has become an integral part of our life biography: after education and years of work comes well-deserved rest.”

We’re working longer But society is changing, Rohner says.

He says increased life expectancies mean that we can stay active for longer, and the rising imbalance between retirement and working life will be a problem for more people and economies in the long term.

Underestimating how long we’ll live is a real concern for the New Zealand Society of Actuaries, which put out a warning in its report to the government last year.

Daniel Mussett, convener of its Retirement Income Interest Group says: “Our research and analysis show that not only are lifespans continuing to increase, but that uncertainty around the age when we might expect to die is extending to later ages.”

He says people may find that their savings

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don’t last as long as they expected. Or they may find that the income they can sustainably draw from their pot of savings is lower than they imagined.

“It’s well-known that most people underestimate their lifespan.

“At worst, this could lead to financial hardship in the later years of your life. We think that careful planning based on good, up-to-date information on longevity can go a long way to avoiding this.”

Assess your risks Matthews agrees you should plan for longer than you expect to live.

The first step is to look at your risk profile.

“There are things you can look at to try to determine longevity. It’s going to be about your own state of health, it’s going to be about your family history, it’s going to be around choices you’ve made, if you smoked, where you live, and how you live.”

before retirement age. She had a triple heart bypass years ago, and has ongoing health issues.

But predicting lifespans on those factors isn’t a perfect science. Even websites that use years of data and take lifestyles into account are just taking a stab in the dark.

People can die abruptly from heart attacks and strokes. Then there are accidents too, cancer, and undiagnosed conditions.

Instead, she’ll turn 82 this year. If she’d saved enough only to fund retirement to 75, her finances would have run out years ago.

Matthews gives her mother as an example of someone who is living longer. Her family history is bleak, with both parents dying

“If you’d asked her in her 50s, ‘How long do you think you have to save for retirement?’ she would have guessed around 70, 75.”

Modern medicine is helping many Kiwis live longer.

Expect 90 to 95 So, what’s a safe ballpark figure?

The actuaries suggest that New Zealanders in their 40s or older should use an estimate

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for their likely lifespan of 25 to 30 years after age 65 (to age 90 to 95).

And turning 100 isn’t out of the question.

“Testing a retirement plan to age 100 would be cautious for this group, and sensible for younger people, especially if female, with a healthy lifestyle or with long-living parents or grandparents,” they say.

Matthews also errs on the side of caution.

“When we do the retirement expenditure guidelines calculations, I work on a life expectancy of 90, which is at the higher end.

“However, it could be argued that it’s too short; that it should be longer, because people are living longer. Longevity generally is in the 80s, for average purposes, so I’ve added five years to that to provide a buffer.”

And don’t forget, people who are in their late 80s and 90s usually don’t spend much.

Factors to consider The actuaries say their research shows that longevity depends on many different factors. These include: • Genes • The lasting influence from early life conditions • Healthy daily living • Keeping moving • Not smoking • Not binge drinking.

Mussett says there’s also an element of pure chance.

“It doesn’t make sense to try to find a single accurate age which you will live to. There is uncertainty about a range of factors, so best be prepared by thinking about the best- and the worst-case scenarios.”

On a positive note Matthews says you should review your spending regularly in retirement and says a financial adviser can help you make your savings stretch.

“On an annual basis, you should do some sort of a review and every five years ask: How am I living now? What are my needs?

What do I want to do in the next few years?

“They tend to actually be quite satisfied because they’ve just accepted that’s how things are, that’s how I live. This is what I can afford to do. They just don’t think about what they can’t do, they think about what they can do.”

“You can’t just cruise through retirement, if you want a good retirement and few money worries over retirement, you need to continue to assess your position.”

That’s also likely because their expenses are low and are covered by the pension. In addition, if they only have a bit of savings and assets, or none, any required rest home level care is paid for by the government.

If you fail to reach your savings goal, don’t panic. Matthews says she’s heard anecdotally that people who fail to save as much as they’d hoped for retirement still manage.

Your own figures Want to estimate how long you’ll live? Try this Kiwi calculator, by Statistics NZ: www.stats.govt.nz/tools/how-long-will-i-live

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The calculator is a good place to start, because it’s based on the most up-to-date mortality information available in New Zealand, says Mussett.

Enter your birth date, and it’ll provide median, pessimistic and optimistic estimates of your life expectancy.

If you’re a Māori New Zealander, note that in 2015, Statistics New Zealand reported that the gap between Māori and non-Māori life expectancy at birth had narrowed to 7.1 years. Māori baby girls were expected to live to 77.1 years (nonMāori 83.9) and Māori baby boys to 73 years (non-Māori 80.3).

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Sort Your Spending Has the economic dip made you rethink your spending habits?

Claire Connell has some easy tips for cutting down on spending.

During our lockdown, chances are you had a think about your financial situation and become more conscious of how it affects your life.

It’s been a tough time for many of us, and it could continue to get tougher for some in the coming months.

Cutting down on non-essential spending can be a big help. Not only can you save more, but you’ll become aware of just how much money you frittered away on things you can’t even remember.

Step 1 Review your spending.

Look at your bank account transactions for the past three months, and start to sort them into categories.

You might have categories like rent or mortgage, food, plus categories for essential and non-essential spending. Add up how much you’ve spent in each area.

Step 2 Decide what changes.

This involves looking at how much you’ve spent in each area and deciding where you can make cuts. Some things, like rent or your mortgage, will be essential and relatively fixed. Other essential items, like food, could be cut down, plus non-essential items like takeaways.

Step 3 Create a new budget.

Now you’ve decided where you can make the cuts, create a new budget. This could be fortnightly or monthly, depending on when you get paid.

There are many good templates online, or you could use a budgeting app. Once you’ve sorted your budget and are happy with it, review it every three months.

Tips for budgeting success • Find a way to create and track your budget that works for you. Make it visual or fun, or use organised spreadsheets, if you prefer.

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Be realistic. Give yourself spending money and don’t be too tight. Keep in some things that make you happy.

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Check in regularly with your spending, to see how you’re tracking for the budget timeframe.

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Don’t be too hard on yourself. Be prepared to slip up from time to time with your spending.

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Think hard before you buy. Become a mindful consumer.

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Direct all the money saved into a savings account or debt repayment. Avoid just ‘absorbing’ it into your regular spending.

Focus on these key areas Food: Food is one of the biggest categories in many budgets. Reduce takeaways, start meal planning, and freeze leftovers. At the supermarket, take a list, buy only what you need, and swap to budget brands.

Insurances: Review regularly to make sure you’re covered for what you need and that you’re paying a fair price.

Always check the terms and conditions before signing a new contract.

Utilities: Power, phone and internet tweaks can bring huge savings. Use comparison websites to make sure you’re getting a great deal. Review regularly as providers change deals often. As above, always read the fine print.

Work habits: Buying lunch and coffees adds up quickly. Bring leftovers then go for a walk at lunch instead. Buy your lunch for a treat, or limit yourself to one coffee or fewer a day.

Your mortgage: Are you on the best rate? Could you be paying off more?

See your mortgage broker or lender and review your mortgage regularly, because there may be better options that could save you thousands.

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How to be a Conscious Spender This year, Claire Connell analysed her own spending and did some research into money habits. She shares some tips to help you spend less on things you don’t need.

Being out of control with your spending can be a stressful way to live.

that same amount of money into a savings account.

Sometimes spending sneaks up on you.

Have you ever been on a spending spree which feels good at the time? But a few days later, you’re left with a hole in your bank account and items you didn’t really need, or want?

Prioritise your favourites Prioritising what you really want to buy can help. On the top of your list, put the things you really want.

This year, I decided to become a conscious spender – and I’ve seen a big difference in my money behaviours. I have more money to spend on things I really want. And the things I buy, I love and use a lot.

Take control and become a conscious spender. You’ll be buying things that are of real value to you, and not wasting money on things that don’t enhance your life.

Here are some of the tools that helped me improve the way I shop.

Make a list Everything I see that I’d like to buy, I add to a list. They’re usually small things, like makeup, a kitchen product, or a new book.

Every time I get paid, I think about what I’d like to buy that pay cycle. But I find that before payday, I’ve usually already lost interest in many products on my list.

Having a list system is a great way to work out how much you could be spending, perhaps in your previous life as an impulse shopper.

Keep a running total of how much all the items add up to, and you might be surprised at how much you’ve saved by deferring spending or losing interest in the purchase.

Some people use a system where, if they decide not to buy something, they deposit

Often, the items at the bottom of the list drop off – you might wonder why you even wanted them in the first place.

If you’re still keen on the product a while later, shop around online for the best value for money. Often there are many different versions of the same product, and you’ll find a better deal. Or you might find something that will work even better.

Take your time On your journey to becoming a conscious spender, time is your friend.

If you tend to buy on impulse, taking time out to think hard about the purchase can help. After a few days you might realise it’s not a good buy, or decide to wait longer before committing.

Choose wisely to make sure what you buy will make you happy, and that you’ll still love it after a week.

Questions to ask yourself: • Is it exactly the item I want?

• Can I really afford it?

• Will I use it enough?

• Do I really need it?

• Can I get a better deal elsewhere?

• Are there other things I’d rather spend my money on?

• Should I sleep on it before deciding?

Minimalism and frugality are hot trends right now. Getting on board with these mindsets could inspire you.

You don’t need to be extreme, but first try using up what you have, and selling what you don’t need before buying more stuff. Buying less, particularly plastic products, is better for the planet too.

Think about the impacts Many of us are guilty of spending most of our money at the start of the pay cycle. If we spend lots of money on impulse buys at the start, it leaves us less at the end.

When you’re thinking about buying something, consider the impact it could have, especially if it adds up to hundreds of dollars. It might leave you short of cash this pay cycle, and might have a spin-off effect on what you do in a week or two.

Why impulse spending is bad •

You’re often left with products you don’t like

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You can get into credit-card debt.

High-interest debt can really slow your financial progress

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You’re often left with feelings of guilt, if you’ve overspent

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It’s harder to keep track of how much you’ve spent during a day of shopping

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You don’t allow time to potentially find better versions of the same product

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You’re often the victim of clever marketing ploys or end up buying things on sale that you don’t need

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It’s easy to overspend and lose sight of your budget.

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Covid-19 and Why You Need Insurance The effects of Covid-19 will be felt by Kiwis well after this health crisis ends. Graham Hill, executive manager Life Distribution at Asteron Life says that’s why life insurance should be a key part of your financial resilience toolkit.

New Zealand has one of the lowest uptakes of life insurance in the developed world, despite the important role it plays in providing the financial support needed to make it through trying times.

At Asteron Life, we want to help people protect the things that matter to them.

The economic uncertainty unleashed by Covid-19 has highlighted the value of financial planning and advice in helping Kiwis get through challenging times.

Building financial resilience Financial resilience is about having a plan in place to help you and the people you care about weather a crisis.

It can help you keep your family, home, business, and lifestyle going, in difficult times.

The economic impact of Covid-19 is likely to be far-reaching. It will almost certainly lead to stress and hardship for some.

One of the financial lessons that will likely

www.asteronlife.co.nz

be learnt from this global pandemic is how important life insurance is in building and keeping financial resilience.

your current cover and the conditions that apply to it, they might be gone for good.

Last year, Asteron Life paid out more than NZ$90 million in life, trauma and income protection claims.

When you come to re-apply for life cover, your insurer will underwrite you again, based on your current medical history.

This might have changed since you were originally assessed.

It allows people to seek the treatment and support they need, without the added stress of wondering how to meet everyday life, business, and family expenses while they recuperate.

Know the value of your cover During times of financial hardship, there can be a tendency to think of insurance as a luxury you can trim to cut costs. But acting hastily now could mean you’re offloading valuable support options you might need in the future.

It’s important to understand that once a life insurance policy is cancelled, you may never get the same level or type of cover again. That’s because your health changes over time, and once you cancel

That’s why it’s important to talk to a financial adviser before you make any decisions, to make sure you’re aware of all your options.

There are always ways to restructure your cover, and different affordability options that could mean you don’t have to get rid of your cover altogether.

At Asteron Life, we want to see people supported to keep affordable cover in place for those moments that matter.

Get the right advice Getting the right professional advice is critical. It helps you understand the

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best options for your current and future needs. An adviser will help you navigate your way through the many options, their purpose – and cost.

If you’re just starting on your insurance journey, it can seem a daunting task.

You might be tempted to make decisions based solely on cost, rather than focusing on your needs.

Advisers can work with you to line up the best life insurance options for you, based on both cost and your own circumstances.

This tough financial climate means many Kiwis are facing uncertain times, so it’s important to seek advice about the life insurance options available to you.

Asteron Life’s insurance covers – including life, trauma, total and permanent disability, and income protection-type covers – have no Covid-19 specific exclusions.

Some policies also have built-in benefits that can help protect your financial resilience in the face of hardship.

There are qualifying criteria for both the premium waiver, and the premium and cover suspension benefits.

Some Asteron Life customers with lump sum covers can apply for a premium waiver for up to six months if they meet the criteria for financial hardship.

Premium freezes, levelled premiums, or restructuring your cover are all options an adviser can guide you through, to find what works best for you.

This means you can maintain cover for up to six months without having to pay your premiums, giving you a financial buffer to get back on your feet.

When you’re signing up for cover, make sure you know exactly what you’re covered for and what you’re not – including if any pre-existing conditions are covered.

Payments start again when the six-month premium waiver period ends.

And for some of Asteron Life’s income protection covers, customers can apply for a premium and cover suspension for up to 12 months.

There’s no need to be medically underwritten when you reinstate the policy within a year, although you won’t be paid out for any condition which first arises while your cover’s suspended.

Be open about your medical history, and let your insurer know if anything changes.

Read the terms and conditions, and ask for explanations if you’re unsure of any details.

This information is general in nature only and has not taken into account any particular person’s objectives or circumstances. Before relying on it, we recommend you speak with a financial adviser.

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UNFILTERED Game-changer series with Jake Millar

Five Minutes with Annette Presley Co-founder of Slingshot and CallPlus Annette Presley rose from a humble South Auckland upbringing to become one of New Zealand’s most inspirational entrepreneurs – and earned a New Zealand Order of Merit.

Presley is a co-founder of CallPlus, which she sold for NZ$250 million in 2015. She now mentors businesswomen through the Lightning Lab XX business accelerator.

By 25 years old, she was the founder of IT recruitment firm Stratum, and making over NZ$300,000 a year. She went on to found many other companies, taking on the telecommunications big guys, like Telecom, and tearing down anti-competitive barriers.

Jake Millar interviews the woman who famously offered to do Theresa Gattung’s job for $1 when Gattung was the chief executive of Telecom.

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“One of my challenges was getting the women to accept that they were better than they thought they were. Women aren’t always great at putting themselves forward.”

Growing up, if someone had said to you that you were going to sell your company for NZ$250 million, what would have that felt like?

I just envisaged getting out of South Auckland. Owning a flash car was my dream, and having a house on the beach.

The things I dreamt of were what I just said, but also a life of choice, and as I’ve got older, I dreamt of making a difference.

I was just a normal 16-year-old girl who was afraid, but inside of me, I also believed that the more I believed in myself, the more successful I would be.

You switched from accounting to computer science?

They were only taking the top 2 per cent of people in New Zealand based on a computer programming IQ test. I missed out by one. One person cancelled, so I went to the course. Computers were not in companies and certainly girls weren’t in the computer industry.

When you were studying, you worked a couple of jobs to get yourself through.

What did you learn?

I worked two computer operating jobs and I’d get a bus from Papatoetoe out to Otara and in between Estée Lauder and Mazda Motors at night. I learned that job descriptions are a suggestion rather than a role. When we write job descriptions, there’s always a point in there at the end that says, “And anything else that the job requires.”

At one point we wanted to go on a holiday, and I’d hired a young girl as a margin analyst. I said, ‘Right, Linda, you’re in charge of everything while I’m gone.’ She completely freaked out, said she couldn’t do it. I said, ‘I’m sorry. I booked the tickets, so you’re in charge.’ I went away and she ran the company. I got back and not one sale went through that wasn’t on point for margins, for good-quality business, and she ran that company exceptionally well.

One of my challenges was getting the women to accept that they were better than they thought they were. Women aren’t always great at putting themselves forward, even accepting promotion. I had several of my key staff refuse promotions, so I would just make them do the job until they realised they could do it. And they’d refuse pay rises. Isn’t that crazy? Can you imagine a man doing that?

What are the main reasons you see that so many start-ups fall over?

To be a successful entrepreneur, the percentage of effort that you have to put in is huge. If I said a million per cent, it would still be too low. I remember years and years of lying in bed at night and doing and redoing financials and presentations.

I don’t always see that in entrepreneurs.

I’ve had people working for me that say, “That’s not part of my job.” They don’t last long with me. You do whatever it takes.

One of your businesses, Call Australia, was growing at about 500 per cent a month for a while.

I had to learn how to train hundreds, thousands of salespeople across Australia.

I went and trained all these salespeople.

Within three months, our growth was 500 per cent.

You started your employees in reception?

It’s true. When we started up Call Australia, we always needed a receptionist, so I’d hire a young girl. What I cared about was how good were you at thinking on your feet, how great were you at making rules and breaking rules. How quick do you think? What can I see in you? Can I see a spark? If I can, I’ll hire you. The receptionists would either last three weeks, or I’d promote them.

What are the common factors that you think the best salespeople do differently?

Preparation. Don’t go out with a presentation that isn’t going to work.

Understand your customer’s business.

Ask questions all the time. It’s all about the quality of the questions that you ask and listening to the answers, and then putting together what your customer actually needs. If you can provide what your customer needs to reduce his cost,

to increase his or her productivity in his company, you’re always going to make a sale.

I know you have two kids. What’s your advice to parents?

I had several miscarriages and that was, I’m sure, because of how hard I worked.

I took a lot of time to be with my kids.

I’ve gone to pretty much all the school camps. Balance is not a word that I believe exists when you get involved in a start-up.

I don’t believe in work-life balance. I believe that when you’re focused on something, you’re focused and it’s focus, focus, focus, focus. But at different points in my life, when I had children, they were my focus and I did manage to find some form of balance in there.

Having sold CallPlus to M2 for NZ$250 million, what advice would you pass on about negotiating a good exit?

I think most entrepreneurs exit too early.

You don’t go looking for buyers; they come to you. I believe most entrepreneurs undersell themselves. If you know what your business is worth and people are telling you it’s too much, who cares? If you believe that that’s the number, stick with that number.

What is one of the biggest challenges you think women in business face that men don’t?

I think that women don’t put themselves out there. They don’t put their hand up enough and say, ‘Yes, I am actually good at this. I want to take that promotion.’ ‘I want double my salary and I’m worth it.’

I think that women have a fear of failure.

Women don’t put their hand up, don’t celebrate themselves, don’t celebrate success and lack confidence. Whereas sometimes I just believe they should fake it until they make it, as I have done.

This interview was recorded as part of the Unfiltered Game-changer series. To see the full interview and other inspiring entrepreneurs, go to www.unfiltered.tv.

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When You Make a Loss Covid-19 meant many people’s investments dropped in value just as the tax year came to an end. PwC’s Mark Russell says you may always have made a profit before, but this year you might be facing a loss.

Covid-19 started to have a serious impact on financial markets in late February and into March 2020.

selling shares in the years to 31 March 2020 or 2021 are not deductible either, if they were held on capital account.

Markets rallied a bit in April 2020, but it remains to be seen how they’ll fare across the rest of this year and into 2021.

If you were looking to claim that the shares you made losses on during Covid-19 were speculative trades and therefore deductible, be aware that you can expect rigorous investigation from Inland Revenue.

Some investors will have suffered losses on their investments for the tax year to 31 March 2020. And depending on how markets travel from here, there’s also some prospect of losses in the next tax year, to 31 March 2021.

As investors weigh up their new financial position, one of the factors to consider is how investment losses will affect your tax outcomes for those investments in 2020 and 2021.

The tax rules when you make losses on investments are different for each category of investments, and also different whether you hold the investments directly, or as part of a fund like KiwiSaver or a managed fund.

Here are some guidelines.

Direct listed New Zealand and Australian shares Most investors who buy shares directly hold them ‘on capital account’, meaning they’re not in the business of trading shares and didn’t buy them with a dominant purpose to sell them.

These investors won’t previously have paid tax on gains from selling shares.

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Where an investor gets dividends during the tax year, they still have to pay tax on them. You can’t reduce the amount of income by using losses on shares sold that would not otherwise be deductible.

This same treatment usually applies to individuals with international shares, and funds with a total cost of less than NZ$50,000 at all times during the tax year.

Direct international shares and funds Investors who hold shares in companies outside Australia or units in funds outside New Zealand usually come under the Fair Dividend Rate (FDR) regime.

This is where investors must include in their tax return deemed taxable income each year equal to 5 per cent of the opening value of their investments.

Where the shares are held by a person or a family trust that meets certain criteria, the actual taxable income is the lower of these: • The 5 per cent deemed income.

• The actual increase or decrease in the value of the international portfolio over the tax year, which includes changes

in price, dividends received, and new amounts invested or sold (known as ‘comparative value’ or CV).

Here’s an example.

Take Sam, who owns a mix of shares in international companies and units in international funds that cost him NZ$100,000.

Sam’s portfolio was valued at NZ$130,000 at April 2019 but at NZ$110,000 at 31 March 2020 and there have been no purchases or sales during the year. So, Sam’s portfolio value dropped by NZ$20,000.

For the year to 31 March 2020, Sam gets cash distributions of NZ$2,500. At 31 March 2021, the same portfolio has grown in value to NZ$120,000 and again he gets NZ$2,500 in dividends.

For March 2020, the 5 per cent deemed income is NZ$6,500 and the CV outcome is a loss of NZ$17,500. (That’s the distribution income of NZ$2,500, less a reduction in value of NZ$20,000.)

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The CV result is lower, but under these rules Sam can’t claim an overall loss against other income, but rather simply has no income for these investments for the purposes of paying tax.

For the year to 31 March 2021, the 5 per cent deemed income is NZ$5,500 and the CV outcome is NZ$12,500, so Sam will include the lower NZ$5,500 as his taxable income.

Direct bonds Tracey bought NZ$10,000 of New Zealand corporate bonds as a long-term investment during the year to 31 March 2020. They were made up of NZ$5,000 of bonds in two different companies, acquired at face value.

But during the Covid-19 crisis, Tracey was worried about her job security and keen to cash up, so she sold both bonds in late March 2020.

The issuer of the first bond was in financial distress so Tracey only got back NZ$2,000 for her NZ$5,000 bonds. The other

borrower had a much healthier outlook and in fact, owing to falls in interest rates, Tracey sold those bonds for NZ$5,100.

As an individual not in the business of lending money, unfortunately Tracey can’t claim a tax deduction of her NZ$3,000 realised loss.

However, she will pay tax on the NZ$100 gain on the second bond, and can’t offset it against the loss on the first bond.

KiwiSaver and New Zealand investment funds Where you invest via KiwiSaver or other New Zealand managed funds, the outcomes are similar to those outlined above, but with a couple of twists.

Most KiwiSaver and other managed funds don’t pay tax on gains on New Zealand and listed Australian shares, but equally they can’t claim a deduction for any losses, so the position is identical to a direct individual investor.

Where the KiwiSaver or managed fund holds international shares and funds, the 5 per cent deemed FDR income applies, and there is no ability to adopt the CV method, where this is lower.

This means there will generally be tax to pay, even when the fund makes a loss for the year.

However, where a KiwiSaver or fund holds bonds, any losses will generally be deductible against the other income of the fund for tax purposes, so fund investors are at an advantage compared to direct investors.

If the bond losses put the fund into an overall tax loss for the year, individual investors will get the tax value of their share of the losses at their prescribed investor tax rate (PIR).

It will be paid in cash by Inland Revenue into the fund, increasing the investor’s balance.

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World Leader in Prosthetics

Business Vision Kiwi companies are coming up with some innovative solutions. Claire Connell showcases some that are working smarter to bring you business that inspires.

Keen mountain-biker Mat Jury broke both his arms, his elbows and his wrists in an accident in the early 2000s.

The engineer inventor found it hard to do everyday tasks, and he started to look at the benefits of prosthetics.

He turned his passion for the subject into a business, Taska Prosthetics, and started developing products that were gamechangers for amputees.

The company now makes one of the world’s leading prosthetic hands using advanced technology. It’s the first in the world to be waterproof and is the most durable on the market.

Through a combination of muscle contractions and sensor triggers, users can open and close the hand, and switch through eight grip positions.

The Bag with a Difference It might just seem like a regular bag to some, but for people with diabetes, the KYT bag is life-changing.

From the outside, KYT looks like a regular handbag. Open it up, and its interior is purpose-built to fit the unique needs of diabetes – making life, and daily care, easier.

Wellingtonian Bridget Scanlan was diagnosed with type 1 diabetes a decade ago.

Struggling to find a way to carry her medical equipment everywhere she went, she took matters into her own hands, setting up KYT (Keeping You Together) in mid-2018.

Scanlan did three production runs of the bag in the first year - they all sold out.

Scanlan spoke to hundreds of people with diabetes around the world as part of her market research. A diabetes diagnosis can be tough, so it was important the bags helped empower people.

“Alongside diabetes, we’ve had requests from other health communities for solutions that could support life with their conditions too,” Scanlan says.

“We had to understand what life with diabetes meant to a cross-section of people – finding common gripes and experiences that we could translate into solutions that matter.”

The bags were initially made in Bali, but now KYT is getting ready to launch several new designs, in partnership with a New Yorkbased company, including a men’s design.

“It fuels our purpose to develop ourselves as the go-to business for design-led solutions that empower people managing difficult, daily conditions.” www.kytbags.com

They aren’t a meal replacement, but designed to give kids extra nutrients.

“Some children in food-poor families may not have a balanced diet of fresh fruit, grains, plant or animal proteins,” the team says.

Raising the Bar A Kiwi-made health bar is finding its way to kids in need in schools around Auckland.

Made by registered charity the Sir Ray Avery Foundation, Amigo Bars are a healthy supplemented food bar which adds nutrients that can be missing from a child’s diet.

The Amigo Bar is New Zealand’s first five-star rated supplemented food bar formulated for children aged 4 to 14 years old.

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“Amigo Bars provide essential amino acids, vitamins and minerals to help maintain healthy physiological and mental development.”

The Amigo team spent years developing it.

Kids even helped design the packaging to appeal to them and their friends.

Money donated by the public and a range of corporate sponsors pays for the bars and distribution to schools. www.amigonutrition.org.nz

When the user flexes their own muscles, they can replicate the use of their own hand.

The prosthetic hand allows amputees to do everyday tasks more easily and carry out delicate movements they couldn’t do before, like holding an egg between their thumb and forefinger, holding a knife, and clicking a computer mouse.

The Taska hand is made up of 500 parts, designed and assembled in Christchurch.

Hundreds have been sold in the US, but they don’t come cheap. They retail for the equivalent of NZ$55,000, so many people rely on them being funded through work or accident compensation schemes.

Taska is expanding and has recently opened an office in Germany for the European market, where demand is growing. www.taskaprosthetics.com

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

Lessons To Learn The dip in the economy caught a lot of us by surprise. For many, it’s the first time our KiwiSaver balances have dropped dramatically and quickly.

So, what we can learn from the experience? Claire Connell explains.

If you’ve been feeling stressed about money lately, you’re not alone. Here are some key take-aways we can learn from the recent economic drop, to help build a stronger financial future.

Don’t panic You might feel stressed if it’s the first time you’ve seen your investment balances drop dramatically. But it’s important not to make any drastic decisions about your investments based on emotion.

Speak to your KiwiSaver provider, or fund manager if you have other investments. Or get in touch with a financial adviser.

That goes for all major money decisions too. Think carefully, get expert advice, and sleep on it first.

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Diversify Financial advisers always talk about diversifying your investment portfolio.

Diversification means having your money invested in a range of different assets, across different risk levels. For example, you might have a percentage of your money in riskier growth assets or funds, and some in conservative term deposits.

Diversifying helps spread the risk of your investments – it’s about not having all your eggs in one basket.

Fund types are important The economic dip has been a good time to test how comfortable you are at dealing with the ups and downs in the market.

No one likes seeing their investment balances drop, but if it makes you very upset, you might not be in the right fund for you.

A growth fund might suit your investment time frame, but if you’re nervous about the ups and downs in your balance, you might want to pick a fund that has fewer ups and downs.

Have an emergency fund If your job is at risk, it’s probably been a wake-up call about the importance of an emergency fund.

This is money on hand (that’s not invested) that you can access easily during rough times.

Most experts say to aim for about three months of expenses. First aim for $500,

then $1,000. After that, slowly build it up.

Research shows that the number one money tip to reduce stress is to have extra money on hand for an emergency. It’s your safety net.

Check your insurance small print If you have mortgage protection or redundancy cover, read the fine print and know exactly what you’re covered for.

For example, some redundancy cover won’t kick in if you’ve chosen the redundancy option yourself.

Don’t make quick decisions about signing up for redundancy cover because of the coronavirus outbreak. You might be better off just to have a larger emergency fund. Speak to an expert.

Save some annual leave Having a bank of annual leave can be a big help in rough situations. For example, some businesses have reduced their working weeks to four days, with the employee having to use annual leave or unpaid leave for the fifth day.

In the worst-case scenario of losing your job, you’ll be paid out your remaining annual leave, which can be a huge help.

This article is general in nature only and has not taken into account any particular person’s objectives or circumstances. We recommend you speak with an independent financial adviser.

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PROPERTY

How to Save Your Rental Hit by a tenant and rent freeze, and possibly facing job losses, many mum and dad property investors are worried how they’ll keep their heads above water. Property investor and developer David Whitburn offers some advice.

Amid all the challenges of the Covid-19 fallout, many property investors will be hard hit, especially those who borrowed big sums, who need to top up their mortgages.

Many investors have lost their day jobs or have reduced income now.

I’m seeing some people making rash decisions and trying to sell their rental properties at the worst time.

The market’s been in a lockdown, so open homes haven’t really been happening, normal auctions are unlawful, and even if you found a buyer, you couldn’t find a solicitor or register the sale.

If they’re struggling, let them know which Work and Income subsidies are available. Many tenants don’t know they might qualify for an accommodation supplement.

Or, they may qualify for other government support.

Suggest they pay as much rent as they can because anything’s better than nothing.

To survive coronavirus as a property investor long-term, you need to manage your risk. For example, you’ll fare better in a crisis if you have a positive cashflow portfolio.

Try not to have a high loan-to-value ratio, so your interest is manageable.

Banks haven’t been open to new lending, so buyers couldn’t get funding, and anti-money laundering verification wasn’t able to be completed.

If you’ve been paying principal and interest, potentially if your job or business income reduces, it might be wise to have an interest-only period.

As we move through the levels, selling may get easier.

Until then there are some things you can do to stay afloat – and become more resilient to shocks like this crisis. Here are some tips.

And in a worst-case scenario, if you’ve lost your job, you can take a mortgage ‘holiday’, but this suggestion comes with a warning.

Don’t be forced to sell Over this crisis, I want people to think hard before they sell their properties. If possible, hold on to that rental.

Here’s why.

In the Global Financial Crisis (GFC) of 2007, the worst time for property was between 1 February 2009 and 31 January 2010, when the Auckland market dropped 11 per cent. With leverage, the drops are amplified and there’s a whole lot of pain.

But there was a recovery in the housing market after that. If you can hold on past the worst of the uncertainty, you should see the value of your property bounce back.

But it might take some time.

Manage your risk Think of the essentials first. You’ve got to keep your personal cashflow going, to pay off your home loan or pay your rent and keep yourself. Those are the essentials before you even think about saving.

Communicate with your tenants as soon as you can.

Your repayments are paused, but interest is still calculated. It’s just deferred, so when you come out of the mortgage holiday period, it’ll hit you again.

Meanwhile, look at strategies to add value, so you can get a better return or a better selling price if you’re forced to sell. You could add extra rooms, or put a second dwelling on the same title.

Some investors will be blessed with some great savings and equity, have the non-bank sector to help, and may not face those challenges. Perhaps family members or friends are happy to lend them money, but for most that’s not the case.

When it’s your job Becoming a professional property investor over this time would be reckless, but the reality is, quite a few people will end up doing that by accident. That choice will be made for them because they’ve been made redundant, or had their hours slashed.

It does require multiple skillsets. You’ve got to be good at financial management – managing loans, short-term WINTER 2020 |

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cash management, long-term capital management, and how you handle debt and risk.

You need to be good at tenant screening, and understand how to be compliant for landlord regulations, like the Healthy Homes Guarantees Act 2017.

You need a high cash flow to do property investing professionally, because the transition from having a job that’s not property-related into property is difficult.

It takes some pain and sacrifices, and it can be tough.

You’ll have a softer cash flow until you build up your portfolio.

Lending is tighter Maybe house values will drop, and Kiwis will be looking for bargains as rental properties.

Some essential workers will feel well off financially still, and others will have saved money by not spending under lockdown, but if you want to go into property investing right now, only attempt it if you have good reserves and cashflow buffers.

Banks are being more cautious, and many are not accepting new business. You could have got a mortgage for around 3.25 per cent fixed for two years in March, but banks have still been assessing interest rates of upwards of 7 per cent, as they do not want to lose money.

Get sound advice from the experts before you make the leap.

Read this one book, set up your money, and get on with your life!

• Learn how to kill off debt and curb spending • Find your best KiwiSaver fund • Save painlessly • Buy a house or be happy not buying one • Move confidently towards and through retirement

PROPERTY

How to Pick the Perfect Home As the former editor of a number of home magazines, Brenda Ward found there are some traits that make a house more popular for buyers. Check out her list.

You’ve found a house and you’re thinking of buying it? Check your wish-list against our guide to what to look for.

Location: Houses near water, parks, and cafes all feature highly on the most-wanted lists.

Add 10 points.

Next come school zones, houses near your workplace, to reduce commuting, and houses near public transport. Add 7 points.

Away from a main road. Add 3 points.

Construction: New houses win hands-down for construction that’s up to the most recent codes. They’ll give you years free of maintenance. Add 10 points.

Older but solid, soundly constructed homes should give come with low maintenance costs. Add 7 points.

Brick and tile homes are favourites for low maintenance. Add 5 points.

Aluminium windows are a plus. To add value, retrofit wooden windows with aluminium frames. Add 3 points.

French doors and sliding doors give the famed ‘indoor-outdoor’ flow, and increase the home’s desirability. Add 3 points.

Kitchen: Open-plan kitchen-living areas are tops for buyers and great for entertaining. Add 10 points.

A kitchen island gives a central living hub for families. Add 5 points.

Older kitchen in need of renovation. Take away 10 points, or, if you love DIY, add 5 points.

Bedrooms: Four-bedroom homes are more expensive, but probably not worth the extra money unless you have a big family. If it’s a bargain, add 9 points.

Three bedrooms offer the most versatility for both family and flatting situations. This will take a couple from being newly-weds, to having one child and a study, to having two kids, each with their own room. Add 10 points.

One-bedroom homes are the least popular, because most people want to have friends to stay from time to time. Take away 10 points.

Bathrooms: In modern homes, often each room will have an en-suite bathroom. Add 10 points.

Two bathrooms is perfect for most houses, when you need to get kids out of the house quickly. Add 8 points.

One bathroom, but freshly renovated.

Add 3 points.

One bathroom, needs renovating. Take away 8 points.

Outdoors: A flat lawn for kids to kick a ball around is the most popular option. 10 points A barbecue area adds appeal, paved or decked, and connected to the house by sliding doors or French doors. 7 points.

A small area for a vegetable garden offers future savings on food. 7 points.

Garages: Most popular is two garages, which will be convenient both for a couple or tenants in a flatting situation. 10 points Off-street parking for one more car is perfect. 5 points.

How did you go?

To rate the property you’re looking to buy, add up the points.

80-100+: Top marks, this house ticks most of the boxes.

60-80: Good potential, is there room to improve it?

0-60: Go back through and work out what you can live with.

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Property managers are the ones tenants contact for questions about rent, organising maintenance, or if something goes wrong. They often deal with insurance claims, if they’re needed.

Should You Use a Property Manager?

What are the pros and cons of using a property manager, or managing a rental yourself? Sharon Cullwick, the new executive officer of the New Zealand Property Investors’ Federation, explains.

When you buy a rental property, it can be a difficult decision whether to use a property manager or manage it yourself. Both come with pros and cons, and it really comes down to your personal preference.

What are the benefits of using a property manager?

It can remove stress. A property manager looks after the day-to-day running of the property, so they deal with the tenants, tradespeople and anyone else needed to keep the property running smoothly.

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You’ll save time. If you want a relatively hands-off approach to property investment, a property manager can help. They’ll deal with a lot of the back-and-forth communication with tenants, which can take up hours of your day.

They keep you compliant. A property manager should be across new rules and regulations. They often follow through on projects to make sure the property is compliant, including things like smoke alarms, insulation, and the Healthy Homes regulations.

Inspections aren’t missed. Most insurance companies require you to conduct regular property inspections, including taking photos and keeping a written record of issues and repairs that may follow.

Tenants. A property manager will find new tenants.

They conduct interviews, credit checks, police checks and reference checks to ensure that the tenant they are putting in is suitable.

Sometimes, as a landlord you will feel like you’re a budget adviser, social worker, family councillor and other social services. A property manager puts a gap between you and the tenant and deals with all these matters.

PROPERTY

Sharon’s tips for rental success Choose your tenants carefully.

Take your time and wait until you find a ‘goldplated’ tenant. This may mean you will have the property vacant for some time, but it’s cheaper than putting in an unsuitable tenant, which may be an extremely costly mistake. Make sure you can get a good working relationship with your tenant. Go with your gut.

Keep on top of rent payments.

Check your bank account the day after the rent was due. The quicker non-payments are picked up, the better.

Communicate well.

What are the benefits of managing the property yourself?

You’ve got control. You have complete control of the tenants you choose for your property.

You’re able to set the rental price. You can decide whether the tenants have pets or not – often property managers have a no-pet policy.

You can tell whether the property is having normal wear and tear, or whether the tenants are hard on the property. Property managers often look after 100 properties each, so they don’t have a thorough knowledge of the property.

Developing relationships with tenants.

Developing a good tenant-landlord channel for communication gives you the ability to work well with the tenants. They’re also often a good source of finding new tenants for a property, without the expense of advertising.

No extra charges. Property managers usually take between 8 and 12 per cent of the monthly rental, plus other charges. When you manage your rental yourself, rent money goes directly into your account too.

You’ll stay on top of maintenance. You can see first-hand what maintenance issues need sorting.

You also can drive past your investment and see

from the roadside if anything needs to be repaired, and contact the tenant directly if they need to do something. You can also schedule the maintenance directly with the tenants.

What are key things to consider before managing a rental yourself?

• How much time do you want to spend looking after your rental? If you’re time-poor and are not willing to learn about the rules and regulations about managing a property, then hand it over to a property manager. Mistakes can be costly and result in fines. Leave it to the experts.

•

Are you willing to learn about the business of property management? Tenancy legislation changes quickly. If you’re not computerliterate, you’ll have twice as much to learn. Join your local Property Investors’ Association to support your business and get advice.

•

Are you organised? You’ll need to schedule things like inspections and keep up to date with paperwork. Can you keep accurate records, and do you have a good filing system? You’ll need accurate records if anything goes wrong.

Keep the lines of communication open.

Ask your tenant to keep you in the loop on things like if they lose their job or are leaving the country.

Don’t waste time.

Time is money – every day your house is empty costs you money. Ensure you act quickly for things like advertising for a new tenant. Never be in a hurry to fill the property if the ‘right’ tenants aren’t around. Get repairs fixed quickly.

Develop strong systems.

Develop a system that works for you.

This includes things like reminders for inspections, to check the rent has been paid, and make sure your bank account set-up makes it clear and easy to follow.

Have a folder for each property and include all documents, plus photos.

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When Opportunity Knocks Investing in property can provide a stable option for long-term investments. There’s still plenty of demand for homes in New Zealand, writes Landmark Homes.

We can’t forget that neither good nor bad times last forever.

Every cloud has a silver lining and in the current climate, property could be exactly that. The economy has just had a huge shock that has got people thinking about how they would like to live.

Property prices could drop in the short term, but unless you’re planning to sell in the current market, this could bring opportunities. And over the long term, property is likely to pick back up again, as normal life returns and demand for homes continues.

But the types of homes people are looking for could change. So, if you’re planning to build, now’s a good time to think smart about what types of homes and features could appeal to people.

What could happen to the property market?

There’s lots of discussion and speculation about what could happen to the property market. But if you look at historical figures through hard times or recessions in the

www.landmarkhomes.co.nz

past, property generally still doubles in value every 10 years. That’s despite a sometimes initial 20 per cent downturn.

And if you’re financially okay, there’s every opportunity to thrive in a market crash. It’s not just an opportunity for high-net-worth investors.

Now could be a good time to buy.

Money has never been so cheap, and if you don’t have to sell during a recession, you haven’t lost a cent.

Is property recession-proof?

Nothing is recession-proof; however, some investments can be safer than others.

Property values go up and down with economic cycles, but if you are in a position to embark on a long-term investment, you’re sitting in a healthy position. And over time, your return on investment (ROI) will be realised.

Recessions lead to a loss of jobs and income, and those directly impacted tend not to consider it the time to make a long-term investment. That means there’s

less competition. When the demand for homes shrink, so do their prices.

The market will never come to a complete standstill, because there will always be people needing to move for personal reasons. This could be job relocation, downsizing, or relationship changes.

Some say that ‘bread and butter’ properties do better in trying times, rather than luxury or high-end properties.

So, if you want to build, where are the opportunities?

Where are the opportunities?

The housing supply in New Zealand remains low and projected demand for homes in 2023 are: 80,000 multi-person households, 482,000 single person and 1,394,000 family units. So, do we maybe need to start thinking smarter to meet current demand?

As a nation, we’ve also experienced more time at home than we have ever had before. Many buyers now view their homes differently after spending such condensed time there.

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We work with a handful of talented and capable designers and architects to design a home that works for you.

There are trends that we are seeing in New Zealand, following Europe and the US, that clients are more interested in smaller homes of higher quality than ever before.

Smaller homes are more cosy, low maintenance and easier to clean, and follow the ‘minimalism’ trend popular all over the world.

Previously, 200 square metres was the benchmark, but now we’re looking at 160 square metres. People are more content with less, for example two-bedroom homes.

They’re also getting craftier with space, and opting for street or driveway parking instead of large garages that take up space.

Innovation can be your best friend when you’re building, by making the most of space.

Through a Landmark House & Land package, you can lock in the contract at today’s value. When you’re looking for a House & Land package, look for high

demand, low-supply locations.

It goes without saying that attention to detail is paramount – building quality saves money in the long run.

Living in a warm, low-maintenance home appeals to many, whether that’s renters or future buyers.

Mortgage rates are also much more favourable, with buyers potentially getting the benefit of both a low interest rate and lower prices.

Homes with a potential rental income are always attractive and can act as a buffer in times like these.

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From your first point of contact with the Landmark Homes team, you’ll be expertly guided through the stages of building your home to ensure it’s exactly how you imagined it – with no hidden surprises.

Landmark Homes is a long-standing member of the Registered Master Builders, so homeowners receive a 10-year Master Build Guarantee on every home the company builds.

The first step is always to make contact. Feel free to call us for a chat to look at the options for building your own Landmark investment home – or a home for yourself. There’s no better time to get the ball rolling than now.

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

Will the Housing Market Crash?

The Kiwi economy has taken a hit due to the coronavirus pandemic.

But what will happen to house prices? Property commentator Ashley Church looks at possible scenarios.

There’s been a flurry of opinions around what will happen to house prices in the wake of Covid-19.

Opinion is sharply divided between those predicting that house prices will crash, and those who think they’ll probably be largely unaffected if the virus is under control by June or July.

This latter view coincides with my own. If the crisis has been resolved within a couple of months, then I’d expect house prices to largely hold up at pre-Covid levels and for the market to be restored to some form of ‘normality’ by July.

This view is based on a reasoned assessment of how things will play out given current market forces and stimulus.

Consider this: • It was almost impossible to buy or sell a property during the four-week lockdown, so prices were literally frozen in time.

• The banks have put in place measures to do whatever they can to give homeowners relief during this difficult time.

• Factors which drove demand before Covid-19 are largely still in place.

• And the Reserve Bank has even dropped the pernicious loan-to-value ratio restrictions – a move which will assist 62 JUNO |

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market activity by giving first-home buyers a chance to get back into the market.

All of these add support to my view that house prices will hold up.

We had four weeks in Level 4, then time at Level 3.

But what if some restrictions are extended even further? Research from the University of Auckland suggests that restrictions may need to last much longer, because we won’t be safe from Covid-19 until a treatment or vaccine has been found.

This could take a year or more.

So how would this play out in the property market? What would a prolonged period of lockdown do to house prices?

The honest answer is – no one knows. There are simply too many variables at play to accurately predict what the market would do if these conditions continued for a long time.

That said, we can certainly make some informed assumptions about how the government might respond to different scenarios.

I can’t cover them all – but here are three logical views of how this might play out, and what each would mean.

Scenario 1.

By the end of May, we were back to Level 2 and largely out of lockdown – but with social conditioning restrictions still in place.

The property market quickly returns to a form of subdued normality, with freedom of movement throughout the country, but a near-blanket ban on international travel.

Under this scenario, house prices can be expected to hold up, with just a few dips in specific locations.

Scenario 2.

The government decides to mandate ongoing Level 3 isolation – either because the number of cases isn’t considered low

PROPERTY

The prolonged effect of isolation on an already vulnerable economy leads to massive job losses and the risk of cascading mortgage defaults.

backed up by a form of government guarantee.

Assuming these actions are taken in response, the impact on house prices would still be minimised because the risk of home owners selling out of economic necessity would have been reduced.

Under this scenario, many more people will use interest-only mortgage payments, or even defer payments altogether for six months.

Scenario 3.

This scenario is highly unlikely and is based on the government mandating indefinite Level 3 or 4 isolation, due to Covid-19 taking hold in the general community.

But it’s not out of the question that the government could also move to force banks to hold off on any default action for a set period, in the same way that they’ve done for rental accommodation – perhaps

Under this scenario, the scope of the problem would be simply too big for the government to protect Kiwis against the worst impacts of the virus and, as a result, the economy – along with the property

market – would go into free fall.

The economic and social consequences of this – not to mention the likely curtailing of civil liberties – are too numerous to mention in this article. They would be severe.

I’m not a health professional and I don’t know which of these is likely to play out – but my layman’s sense (and the best medical information out there) seems to suggest an outcome somewhere between Scenarios 1 and 2 – both of which are manageable.

Ashley Church is a property commentator for OneRoof.co.nz. He’s been a media commentator on property for more than 20 years. Email him at ashley@nzemail.com WINTER 2020 |

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Correct as at 4 May 2020, when we were in Level 3.

enough, or because the dreaded ‘second wave’ of infections somehow makes its way into community transmission, although it’s difficult to see how this could happen.

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

Three Recession Strategies How do you hold onto your property portfolio when times get tough?

Andrew Nicol of Opes Partners has three smart tactics.

There is a number one rule, if you want to be a seriously successful property investor.

facility’ or ‘line of credit’, which they use if times get tough.

to protect yourself from other things that could go wrong.

It is: If you have a good property, one you know is a good long-term investment, one you know is going to go up in value, whatever happens – don’t sell it.

Let’s say you were able to borrow a maximum of NZ$140,000 against your own property to fund the deposit for an investment property.

That’s why it may be the right time to consider landlord insurance, which could protect you in some cases of unexpected maintenance or bad tenants.

You need to hold onto it for as long as possible, even as times get tough.

You borrowed NZ$120,000 for the deposit, which allowed you to buy an investment worth NZ$600,000.

For instance, most companies will cover you if your house is damaged and can’t be tenanted. This ranges from six weeks to 12 months, to a maximum of NZ$20,000.

The question then becomes: How do you make sure you’re not forced to sell the property early, if your financial situation changes when the unexpected happens?

Right now, we all know a bit about the unexpected happening.

So, here are three tactics you can use to help continue holding on to your portfolio: 1. Set up a buffer account with a line of credit Let’s say you’re made redundant, or you become unable to earn an income.

You might initially think: “I need to sell my investment property, because I can no longer afford to top up the mortgage or cover any maintenance costs.”

Instead of selling early, many property investors will set up an additional ‘lending

There’s still an extra NZ$20,000 of lending you could borrow. In this case, many investors will set that up as a revolving credit. That means you can access the NZ$20,000 if you need it, but you don’t pay any interest until you dip into it.

Yes, it gives you access to cash, but what it really gives you is time to sort out your financial position if something goes wrong.

2. Get the right type of insurance in place The next tactic is to make sure that you have the right insurance in place.

Any new additional redundancy or income protection insurance you purchase will likely have an exclusion for events related to Covid-19.

But that doesn’t mean you shouldn’t try

Some companies will also protect you if you have to evict your tenants because they aren’t paying rent, if tenants have to be evicted, or if they leave without notice.

You might have been in the position where unexpected maintenance or vacancy wouldn’t have worried you in the past.

But, if your employment is less secure now, these might worry you a bit more, which is where landlord insurance would be useful.

Always read the fine print of insurance.

Know exactly what you’re covered for – and what you’re not.

3. Remove the emotion and know the numbers Successful property investors worry less about the ‘property’ and more about the ‘investment’.

Go to www.opespartners.co.nz to book a free session on how to become a property investor.

Smarter Financial Decisions, Together.

You need to hold onto it for as long as possible, even as times get tough.

I’ve had several of my property investor coaching clients wanting to sell their properties, just in case.

Their reaction to sell was based on emotion.

But once we’ve run the numbers together and seen the facts, they’ve seen that’s unnecessary, right now.

That’s why you’ve got to run and stress-test your financial assumptions on a property, or work with a property coach who can do that analysis with you.

And finally…

And a final bonus tip – get educated. If you’re still working from home, or unable to go out for dinner as much, use that time to learn more about investment.

A few potential resources for property investment are the Property Academy Podcast, my daily 10-minute show, which you can find wherever you listen to podcasts … or the free property academy video course, which you can find at www.opespartners.co.nz.

Just Released:

Learn how to become a Property Investor for Free with Property Academy Learn how to use leverage to become a property investor.

This is just one of the 13 topics covered in Property Academy, a newly released video course by Opes Partners.

In this free course, Andrew Nicol – the author of this article – teaches you all the concepts you need to successfully invest in property.

The course includes: 15 videos, 5 mini–tests, 3 calculators and 2 quizzes.

impressed! You have produced a really easy to follow/read guide. What a great resource for people “ I am incredibly wanting to get into investment. I have sent on the link to friends and family who need to go through it.

“

– Georgy

Go to opespartners.co.nz to enrol for free

REGULARS

Book Reviews Reviewed by Sarah Ell

More: The 10,000-Year Rise of the World Economy

The 4 Day Week

By Philip Coggan Published by Allen & Unwin, NZ$55

By Andrew Barnes Published by Hachette, NZ$37.99

When Philip Coggan sat down to write this readable and entertaining history of the world economy, he could have had no idea what was about to hit it.

The last chapter is called ‘The Crisis and After’, but it’s referring to the Global Financial Crisis, not the Covid-19 crisis, through which the world economy has yet to navigate. Perhaps even now Coggan is at home busily writing a new chapter to cover recent events?

However, one of the lessons of this book is that the world economy, or some form of it, based on trade and finance, has been around for 10,000 years – and isn’t likely to be completely wiped out just yet.

Coggan has been a business journalist for more than three decades, and has written books on finance and investing. Despite the potentially dry subject matter of More, he weaves a fascinating story of how the world economy was built, and the challenges it has faced.

The story starts in ancient times, with the rise of civilisations in the Middle East as humans turned from hunting and gathering to agriculture. It then covers the rise of Asian economies from 200–1000CE, the revival of Europe in the first half of the second millennium, and the massive changes of the agricultural and industrial revolutions of the latter half. Coggan notes that the most massive changes, however, have occurred since around 1820, when mass manufacturing, globalisation and technology became major factors.

The future of the world economy might be up in the air, but if the clue to where to go next lies in where we’ve been, this is a great place to start.

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Many people thought Perpetual Guardian founder Andrew Barnes was a bit crazy when he first announced that his financial services company was trialling a four-day work week in 2018.

Barnes came up with the idea after reading research which showed that employees were truly productive for only 1.5–2.5 hours a day. Surely, he reasoned, if each of his workers could increase their productivity by around 40 minutes a day, they would need to be in the office for only four days a week to achieve the same output.

The Four-Day Week explores not only Barnes’ initial eightweek trial, and Perpetual’s move to using the scheme full time, but explains how other companies looking to introduce flexible work practices (FWP) can proceed.

The book discusses the benefits beyond better productivity and happy employees: positive impacts on the environment with fewer people driving each day, more time for staff to do volunteer work or social support, narrowing the gender pay gap, increasing equality in the home, and reducing the strain on the health system.

It also looks at the obstacles companies might face in introducing FWP, including legal issues and resistant staff.

It’s interesting to consider whether the experience of working remotely due to Covid-19 will change the way we work. With time-wasting meetings and fights with the photocopier removed from our days, did we find ourselves being more productive? And how can those learnings be translated into a new way of working? Reading this book and learning more about the benefits of FWP for both employers and employees might be a good start point for many businesses planning a new course.

JUNO

Junior Children often have a better relationship with money when they learn about it early in life. In this issue, learn about KiwiSaver, and how it can help you in the future.

What is KiwiSaver?

You might have heard grown-ups talk about KiwiSaver. If you’re older, you might have heard about it in school. So, what is KiwiSaver?

What is KiwiSaver?

KiwiSaver is a government scheme that helps Kiwis save money.

If you’re young, these things might be a long time away for you. But the good thing is, the longer your money is in KiwiSaver, the more it can grow.

The money can be used to help you buy your first home, or for your retirement.

Your generation will be the most cluedup about KiwiSaver, so hopefully you can use what you know to get the most out of your money.

When you start to put in money regularly when you’re over 18, your employer and the government will add money to your account too. This gives your savings a real boost!

Your KiwiSaver money is invested. What does invested mean? It means a KiwiSaver provider uses your money to buy small parts of companies, called shares, that it hopes will do well in the future. Because your money is invested, this means the balance can go up and down.

This money can only be used for your first home or retirement, so make sure you won’t need the money for any emergency in the meantime.

Anyone can join KiwiSaver, no matter what your age. When you start a parttime job, you’d be smart to sign up to KiwiSaver. Once you start earning money, a small part of your pay will go to into your KiwiSaver account, if you want it to.

If you want to learn more about KiwiSaver, your parents might be able to help you. They may already be in KiwiSaver themselves. Otherwise some helpful websites you can visit are sorted.org.nz and ird.govt.nz/kiwisaver

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

Great Kiwi Podcasts Are you looking to upskill or stay on top of your finances? Podcasts can be an easy way to digest and learn complex information, as well as stay motivated, writes Claire Connell.

Feeling bogged down with your book? Listening to a podcast while you’re cooking, in the car, or relaxing at home could help you stay interested in all things money. Here are some favourites.

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Cooking the Books - NZ Herald and Newstalk ZB Frances Cook is one of New Zealand’s leading personal finance journalists. After her own experience of money mismanagement, she turned her finances around. Now she’s using her experience – plus experts’ advice – to help others get ahead.

Her recent book Tales from a Financial Hot Mess has followed years of excellent podcasts through Cooking the Books. Cook covers topical content around investing, property, and other budgeting topics. If you’re new to investing, Cooking the Books is a good place to start − and Tales from a Financial Hot Mess is one of the best personal finance books we’ve read lately.

The podcasts are released for free every week but, as a side note, NZ Herald Premium has great business and other money content, so we recommend subscribing. It’s NZ$20 a month and you can access Cook’s articles, plus ones by other experienced business and personal finance journalists.

Your Money with Mary Holm − RNZ Mary Holm is one name to get familiar with if you’re starting your money journey. She’s one of New Zealand’s most experienced financial authors, journalists and speakers. Holm speaks on Radio New Zealand regularly about how to make your money work better. Topics include KiwiSaver, a subject Holm has written several books about, investing, risk and return, retirement saving, and personal finance. Holm explains everything in simple language, and gives sensible tips and insights.

NZ Everyday Investor Run by Darcy Ungaro, a registered financial adviser, the NZ Everyday Investor is the country’s only specific investing podcast. Ungaro hosts financial experts to cover a range of topics. Once you’ve built up some investing know-how, and know the basics of investing and risk, NZ Everyday Investor’s a great next step. Some of the talks cover advanced concepts such as interest rates, cryptocurrency, and gold, and some advanced financial products. But some episodes are suitable for beginners, so have a search through them.

Smart Money − Newstalk ZB Part of Newstalk ZB’s ‘finance hour’ every Sunday at 5pm, Smart Money is an easy-listening podcast.

Each week the show features a different financial expert. Topics include investing, KiwiSaver, financial mistakes, retirement, and a range of personal finance topics. Presenters Tim Roxborogh and Tim Wilson have decent money knowledge themselves and run the show well. Listeners who phone in with their ‘horror stories’ share pitfalls to watch out for.

The Happy Saver Blogger Ruth shares relatable stories from Kiwis around the country on money topics. She interviews people about their own journey, and they’re often motivating and inspiring. You’ll find tips you can use on your own journey, too. Her blog is based on her own experience, and she doesn’t shy away from sharing her views on her preferred investment options. She’s friendly and approachable, and her guests are “real-life Kiwis”.

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During the day, pop into our Cellar Door in the Village Exchange courtyard next to Porters Boutique Hotel for a flight of our CRU brand wines for NZ$15, or simply enjoy some sunshine on our patio with a glass in hand and small plates to share.

Buy any of our wines to take home with you. We offer tastings until 4pm, and welcome walk-ins.

Crossing into the evening hours, our Cellar Door turns into a cosy Wine Lounge featuring our family of fine wines from across New Zealand by the half glass, glass, or by the bottle, as well as a rotating selection of unique wines from around the globe.

Small plates are available day and night.

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Book in advance for a two-hour private tasting journey across New Zealand with our sommelier (NZ$150pp).

Enjoy our finest wines, select barrel samples, and enjoy an audiovisual wine experience in our studio theatre. Bookings are essential for this unique experience.

The dream team The two stalwarts behind the Smith & Sheth brand are Steve Smith MW and Brian Sheth. They share a love for the same things: fine wine, Aotearoa New Zealand and enjoying life’s pleasures.

The pair met in Hawke’s Bay over a glass of chardonnay and in 2014 realised their

vision of founding a wine dream together.

That dream was to craft impeccable wines from vineyards of exceptional quality and to create experiences where they could share these wines with like-minded people.

Smith has a formidable reputation in the wine industry: renowned for establishing Craggy Range in Hawke’s Bay and Martinborough, he is also one of only a few qualified Master of Wines to be based in New Zealand.

Sheth, from Austin, Texas, is an investor and wildlife conservationist, with a passion for wine and a strong love for New Zealand.

For opening hours and bookings, contact the team on: bookings@smithandsheth.com www.smithandsheth.com 06 650 5550

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Sell now!

What is Insider Trading?

What’s insider trading and what are the rules about it in New Zealand?

Sarah Vrede, the FMA’s Director of Capital Markets, explains.

‘Insider trading’ is when someone buys or sells the shares of a listed company, or encourages others to buy, hold or sell them, based on material information that they know about and the general public does not.

Material information is any event or fact that could affect the future prospects and performance of the listed company.

If you ever find yourself having information about a listed company that’s not generally available to the public, you should not trade shares or debt securities in that company.

This is because buying or selling shares to take advantage of information that is not publicly available is illegal. You could go to jail for up to five years or face significant penalties.

of Covid-19 on their businesses, consider the materiality of those impacts, and potentially adjust their plans or business models.

paid $150,000 in lieu of a penalty and was barred as a director or manager of a listed business for five years.

Why is insider trading regulated?

Insider trading erodes investor confidence in capital markets because it creates an uneven playing field. Investors who buy or sell with the benefit of inside information, will trade at prices ahead of the likely price movements that will occur once the information is publicly known. Essentially, insider trading gives an unfair advantage.

Another case involved Hamish Sansom and Jeffrey Honey (both formerly of ERoad).

Honey was sentenced to six months’ home detention. Sansom’s case resulted in a hung jury and he was later acquitted in a second trial in 2018.

It’s important the FMA deters this type of misconduct and maintains market integrity by prosecuting cases.

Here’s an example, a seemingly innocent conversation between two friends at a barbecue:

What can the FMA do?

The FMA finds out about possible insider trading in many ways, including complaints and referrals from the NZX’s regulation unit, NZXR.

Person A: “Hey, did you hear that John’s company lost their biggest client? It hasn’t been announced yet, but it will probably hit them hard.”

NZXR works on the frontline, where it’s responsible for live market surveillance. If it detects any suspicious activity, they’ll refer the activity to the FMA for investigation.

Person B: “Really? I own shares in them.

Thanks, I’m going to quickly sell now.”

The penalties for insider trading can be civil or criminal. Criminal convictions have a five-year maximum prison term and/or a fine of up to $500,000 for an individual.

A civil pecuniary penalty can be $1 million for an individual.

Person A: “Good idea. I’d get out too.”

Both the NZ Stock Exchange (NZX) and the FMA are constantly monitoring for insider trading.

The uncertainty created by Covid-19 may increase the risk of insider trading. This is because there is an increase in non-public information as companies assess the impact

Insider trading might sound like something only sophisticated investors or those ‘in the know’ can do but, as the barbecue story shows, it can be as simple as two friends sharing, and acting on, details that are not publicly available. If you think you might have some inside information, don’t be tempted. If you are in any doubt seek legal advice before you share information. www.fma.govt.nz

Definition: Listed company: A listed company’s one that makes a financial product (shares, bonds etc) available for trading on the NZX, New Zealand’s share market.

Disclaimer: The FMA is contributing content as part of its objective to support well-informed investor decisionmaking and promote fair, efficient and transparent markets.

This is not an endorsement of any provider or product.

Famous cases The FMA has taken two insider trading cases to court.

In 2019, Mark Talbot, formerly of Plexure, WINTER 2020

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

Going Up, Going Down Economist Cameron Bagrie takes a good, hard look at New Zealand and recovery after the coronavirus impact.

And this is now…

That was then…

Look back a couple of months and house prices were lifting strongly, buoyed by incredibly low interest rates, strong migration and solid income growth.

They rose 9.3 per cent in the 12 months to the end of March.

In Auckland, house prices were up 8.2 per cent and the rest of New Zealand saw a lift of 10.3 per cent.

• Banks have tightened credit availability.

• Unemployment looks headed above But what goes up can quickly come down. A 10 per cent. It peaked at 6.7 per cent in rapid change in the economic landscape has the Global Financial Crisis (GFC). people pondering how far house prices will fall.

• Migration has all but stopped, and rent Some argue not much, given support being rises look to be replaced by rent falls. provided by low interest rates, a mortgage holiday scheme and housing shortages. But this prediction ignores some realities:

Jobseekers grow Unemployment is surging.

Thousands are signing up for the Jobseeker benefit. The real destruction has been delayed by 1.6 million people who were temporarily supported by the wage subsidy.

Now we need new programmes to retrain and reskill people.

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Winners: Lower prices will hurt some, but they’re good for those wanting to buy.

VUL

The alphabet of a recovery Day follows night, just as night follows day. The New Zealand economy will emerge from this recession. A key issue is how fast.

Economists point to different letters to show an indication of the speed of the recovery.

• A V-shaped recovery is a sharp recovery with not much structural change following a downturn. Life goes back to normal.

• A U is a more protracted recovery, slower across the bottom.

• An L is a long-drawn-out slog. Think of post-1987 and the economy until 1992.

I think the first leg of recovery will look like a V, after moving down through the alert levels and seeing more businesses open.

But many businesses will not open again. Covid-19 will change behaviours and mean structural changes across the economy.

After the quasi-bounce, there are some hard yards ahead. Welcome to the new normal.

MARKET INSIGHTS

Get the economy moving

We’ll have to park political bickering.

Public infrastructure investment will be one lever immediately pulled to help the economy springboard out of recession. But we are going to need an awful lot more levers pulled.

We’ll need an extensive programme of microeconomic reform bought in to drive growth and help get unemployment back down.

Domestic travel the key The hit to the international tourism sector from shutting the borders is massive. It was a NZ$17 billion industry, courtesy of four million visitors. The market has collapsed.

Stepping up

Tourism cuts both ways, though. New Zealanders travel too. More than three million went overseas in the year before the lockdown.

Eventually, people will want to holiday, and odds are it will be a domestic trip long before an international one.

• Liquidity support is being provided to ensure the financial system is functioning properly.

That’s incredible!

Many councils are still looking at putting up rates. They expect to take more money out of ratepayer’s pockets at a time when the economy is facing a deep recession and unemployment is surging. Unbelievable.

The next lot of local authority elections cannot come quick enough.

There will be learnings we need to take from the economic shock we are going through. We’ll need to examine the readiness of the heath system. What does border control look like, going forward?

The pressure on small businesses, in part,

The government is writing out big cheques supporting the economy on numerous levels, including the NZ$10 billion plus wage subsidy scheme. They are spending big. Aggressive action is helping to soften the economic hit, but New Zealand is still taking its biggest hit since the 1930s.

A host of commercial landlords are also working constructively with tenants, though some are playing hardball. Residential landlords are taking the hit if tenants can’t pay.

Banks are being told to be courageous. We need the big to support the small.

is not the fault of small businesses, because they’ve been forced into a lockdown.

But stronger financial skills would have helped them navigate it, and could have made them better placed.

Maybe, as the dust settles, we’ll bite the bullet and make financial literacy compulsory in schools. Money is a life skill that needs to be formally taught.

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

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Correct as at 28 April 2020.

One learning from the GFC was the need to strengthen the banking sector.

• The Official Cash Rate is marginally above zero.

• They are buying bonds to help keep longerterm interest rates low.

Tourism operators will need to re-pitch to the domestic market, which is already a big market, but those three million trips overseas are a large pool of additional clients.

What’s next?

The Reserve Bank has pulled out the bazookas.

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

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MARKET INSIGHTS

Oil Hits Troubled Waters The oil markets have made headlines as one of the industries most affected by the Covid-19 pandemic, but the industry was already under pressure, says Chris Smith of CMC Markets.

The 2020 oil crisis will be remembered for many years as a major result of the Covid-19 global slowdown and the economic freezing of economies.

It’s likely to cause more long-term damage than the effects of the Asian oil demand crisis of 1988-89.

The oil business may never be the same again, Shell chief executive Ben van Beurden told Bloomberg. “There will be changes, and therefore we have to be ready for that.”

The Covid-19 nightmare With a constant steam of data and oil industry dynamics being released, it’s easy for an investor or trader to overcomplicate their thinking about the oil markets.

But, at the core of the problem, price movements come down to basic supply and demand, and the outlook for both.

Before Covid-19, the world consumed 98 million barrels per day (MBPD) of oil.

That supply was met by over 50 countries, from both Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC nations.

Goldman Sachs oil industry reports show the global demand impact of the pandemic is an estimated loss of 21 MBPD, or over 20 per cent daily.

Covid-19 shutting down almost entire economies is a nightmare many industry executives would have never imagined.

Past crisis events such as 9/11 and the 2008 Global Financial Crisis led to substantial declines in travel, but not to the extent we’ve seen. There’s been a complete shutdown of consumer air travel, the cruise line industry is on ice and most individuals are barely driving, because working from home is the norm.

This crisis hit the oil industry when producers were pumping record volumes to meet demand, and the world was seeing strong growth among world economies.

The outlook is bleak. The International Energy Association says oil demand could drop by 9 per cent, or 9 MBPD on average across the year, returning oil consumption to 2012 levels.

Coal demand could also decline by 8 per cent, in large part due to electricity demand expected to drop nearly 5 per cent over the course of the year.

Oil price falls into negative territory Within 20 minutes of trading on 21 April 2020, the oil market did something it had never done before. Prices for the West Texas Oil futures contract for May dropped to negative US$40 a barrel (more than 310 per cent down from the day before).

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

Covid-19 shutting down almost entire economies is a nightmare many industry executives would have never imagined.

Why did this happen?

The US energy department suggested it was a perfect storm of factors, including unprecedented dislocation in oil markets, forced liquidations, margin calls by large holders of oil futures, limited storage options and a lack of traders wanting to take the delivery on the expiring May futures contract.

This created a scenario where some participants in the oil market who would usually close their futures position via cash settlement (as most do to avoid the physical delivery of oil) were stuck and forced to sell contracts at negative pricing – effectively, paying someone to take the oil off their hands.

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Global supply battle The United States has become a real problem for OPEC nations in recent years.

It went from being a net importer to a net exporter of oil – producing less than 9 MBPD back in 2016, to almost 13 MBPD in 2020.

Before Covid-19, debt was cheap, and capital was abundant for the shale oil industry.

There was new major exploration under way, and other big producers in Saudi Arabia and Russia were ramping up production to help supply the economic boom in China.

With its sudden hit, Covid-19 created a nightmare, sending oil prices below break-

even levels for most of the US industry, as well as many other global producers.

And we’re only just beginning to see the flow-on effects.

Countries’ ad budgets are forecast based on oil prices usually over US$50, there have been cuts to capital expenditure and dividends are slashed. Also, banks are not only trying to protect their own loan book to the energy industry, but they’re also raising bonds for these firms to ensure their survival.

Where can you invest?

• Leading oil firms – look at firms that have the strongest balance sheet and track record of surviving large drawdowns in profit and oil price declines.

MARKET INSIGHTS

•

•

Futures and ETFs – look at futures and exchange-traded fund (ETF) products, and ensure you understand the underlying product and its structure.

Oil storage companies – look at firms benefiting from this supply and demand issue by providing storage facilities for the excess oil.

Oil service firms – look at firms that provide the expertise to drill and refine oil and gas.

Outlook Firms such as Goldman Sachs have noted that oil fundamentals are finally showing signs of improvement.

Supplies are starting to decline from panic levels, and production halts and

household lockdowns are beginning to lift in countries. Demand is starting to emerge again.

But the oil recovery will require patience and time because airlines and the travel industry will be the last to bounce back.

With a vast amount of oil still in storage, daily supply will be above demand for a long time.

Getting life back to more normality and manufacturing back in full swing is the only good solution to improving the oil markets.

Cutting supply increases the cost for the driver at the pump and brings in far less revenue for both countries and listed oil firms.

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.

Definition: West Texas Oil: West Texas Intermediate (WTI) is a crude oil that serves as one of the main global oil benchmarks. It is sourced primarily from Texas and is one of the highest quality oils in the world, which is easy to refine.

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Correct as at 5 May 2020.

•

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

Long Road Ahead Measures to contain coronavirus have dealt a body blow to European economies. Andrew Kenningham of Capital Economics looks at how they’ll recover from the fallout.

European share markets have suffered huge falls since coronavirus hit the continent in February.

Most benchmark indices, which measure change in a group of shares, slumped by around 40 per cent in just a couple of weeks.

From the lowest point in late March, they’ve staged a partial recovery.

By early May, they’d regained 10 per cent and were hovering around 30 per cent below their pre-coronavirus peak.

But what will happen from here?

No fast recovery There’s enormous uncertainty about the path of the epidemic and the economy, let alone the price of shares.

My best guess is that equity markets will continue to recover in the coming months, but that they’ll remain well below their pre-coronavirus peaks at the end of this year and even next year.

But there are, however, a couple of reasons to be cautiously optimistic.

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1. The worst is behind us First, although the euro-zone economies are heading for their biggest slump since World War Two – we think they will contract by around 10 per cent this year – the worst is probably now behind us.

Gradual pickup expected European equity markets are likely to increase at only a gradual pace over the coming year or two.

Governments are now beginning to lift their containment measures, because they think the peak of the infection has passed.

Many hoped at first that the lockdown would be fairly brief, but it’s now clear that restrictions of some kind will remain in place for months.

Italy and Spain have already allowed non-essential businesses to reopen, and France and Germany have been setting out plans to start the process.

2. Tech’s booming Second, part of the weakness of European stock markets is due to a rebalancing in favour of large tech firms, which are almost all based in the United States.

This rebalancing makes sense because these are the sectors (along with healthcare) which can prosper during the pandemic.

But I think this process has now come to an end – so global share markets are more likely to rise in unison across the world.

The key reason for caution is that the economic recovery will be slow.

This will particularly affect any business which involved large gatherings of people in confined spaces. International travel may be impossible for a while yet.

Even after the restrictions are finally lifted, lasting economic problems will remain.

Many companies and households will find they have more debt and lower revenues or earnings.

Consumer and business confidence could take a long time to recover. I can’t see the European economy getting back to its pre-crisis levels until after 2022.

Another concern is the risk of a second wave of infections.

MARKET INSIGHTS

Europe has passed the peak of the epidemic, but only because of the restrictions which are still in place.

encouraged banks to keep lending. This will cost a lot, but will help avert a sharp increase in unemployment.

Governments may need to impose controls again if the infection rate begins to pick up again, and that would cause the economy to relapse.

However, the existence of the single currency, shared by 19 countries, makes it difficult for the countries with the weakest public finances to borrow enough to support the economy through the crisis.

Single currency in spotlight The crisis has also worsened tensions in the single currency area, the Eurozone.

The economies which were weaker before the crisis, such as Italy and Greece and, to a lesser extent, Spain and Portugal, have been among the worst hit.

The Italian and Spanish health systems were overwhelmed, forcing more severe lockdowns, and the reliance of southern Europe on tourism leaves them at risk.

Finally, although governments have provided unprecedented amounts of policy support, there has been less support than seen in the US. Governments have offered companies subsidies to keep employees on the payroll, have deferred tax payments and have

The main concern is Italy. Its public debt was much higher than those of the other major economies even before the crisis, at around 136 per cent of gross domestic product (GDP), and it’s going to balloon this year.

That’s caused investors to take fright.

In turn, this is pushing up the cost of borrowing for the Italian government.

For now, the European Central Bank is trying to smooth the cracks by buying billions of euros of Italian government bonds.

Looking ahead, though, this could backfire, because governments in northern Europe are unhappy with the central bank providing this kind of financial support long-term.

Overall, while the Eurozone economy appears to be coming out of intensive care, its recovery will take years, rather than months – and it may never get back to full health.

Against this backdrop, share markets should continue to trend up, but I don’t see them regaining their pre-crisis levels for the foreseeable future.

Definitions: Equity market: Also known as the share market, an equity market is where shares are issued and traded, either through exchanges or over-the-counter markets.

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

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Navigating the winds of growth

The best sailboat is nothing without wind.

We don’t hold Sky, Blockbuster or Blackberry. They were all once share market darlings, but none had tailwinds. It might seem obvious, but how many of the big companies that index funds track today will be the biggest tomorrow? In fact, only a handful of top companies are the

same decade to decade. For long-term wealth creation you need what’s next, so we work to find emerging leaders and get in early for the journey up. We’re interested in where the world is going, and the wind in your sails will take you a lot further.

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

More than before, it’s time to make smart moves.

We have fabulous plans, flexible options and creative solutions that will make your next home a true Landmark.

Visit our website and be inspired to begin your dream. Design and build a quality home for your family or take the opportunity to build for your future.

Looking for a high-reward investment? A new home? Investing in a Landmark Homes showhome could be perfect for you.

Explore your options now at landmarkhomes.co.nz/investor/offer/ or contact steven.bunyan@landmarkhomes.co.nz.

C O N TAC T U S T O DAY

0800 477 110 LANDMARKHOMES.CO.NZ

DON’T BUILD A HOUSE, BUILD A LANDMARK.