JUNO Winter 2021 – Live Like a Millionaire For Less

YOU CAN FAKE IT… But hereʼs a great way to make it!

ADVICE FROM N.Y.

Buy fewer clothes and look twice as wealthy

CRACK A NEST-EGG Why retirees should spend their capital

9 772422 894000

NZ$9.95 INC. GST

How to travel for free • Mary Holm KiwiSaver Q and A • Exodus from Auckland

Sneak Peek

Our Name is Changing!

You tell us you love JUNO magazine just as it is and we’re not planning to change it – apart from one thing, that is!

From the next issue, JUNO becomes Informed Investor.

A year ago, our new publisher, Opes Partners, took over the reins and challenged us to look to the future.

We wanted to pick a name that reflects what we’re really about.

We’ll have the same team, the same experts, the same owners, and the same way of making investing simple.

Why Informed?

Last year, we asked our readers a fun question: How would they describe JUNO in just three words?

Along with lots of other really nice things, they said: • “Considered, Intelligent, informed’.

• “Fun, informative, modern.”

• “Informative, eye-catching and accurate.”

• “Informative and simple to read.”

• “Positive, uplifting, informative.”

The word that kept popping up was ‘inform’.

So, our name now explains what we do.

It tells you that we can help you make informed decisions that could change your life for the better.

The first issue with our new name comes out at the end of August.

Rest assured, we’ll be the same motivational, inspiring, readable magazine you’ve come to love. And even bigger than before!

ADVICE FROM N.Y.

Buy fewer clothes and look twice as wealthy

CRACK A NEST-EGG Why retirees should spend their capital

YOU CAN FAKE IT… But hereʼs a great way to make it!

How to travel for free • Mary Holm KiwiSaver Q and A • Exodus from Auckland

Will your properties still be profitable after the tax changes? opespartners.co.nz

The government tax changes will significantly impact property investors who own existing properties.

From 1st October, the government’s interest deductibility tax changes will start to come into effect. Investors will pay more tax on some properties, and this new reality will change the types of properties Kiwi investors choose to buy.

Here’s what that means for you as a property investor.

Any properties within your portfolio will gradually start to pay more tax. Once fully implemented, a property with a $600,000 mortgage will be about $5,000 worse off per year.

While your properties might be cashflow positive now – providing a small passive income – you may soon need to top-up their bank accounts.

But there are strategies you can use to avoid being punished by the new changes.

Government announcements suggest that New Builds will not be impacted by these changes. With no extra tax paid, newly built rental properties will soon have a significant tax advantage compared to other properties on the market.

This may make New Builds a more practical investment for you if you want to get ahead and earn the flexibility to live life on your terms.

Opes Partners’ Finds New Builds Properties For Investors You can view New Build investment opportunities from developers around New Zealand when using Opes to find your next investment property. This includes projects from developers with a national brand name and smaller organisations that only the locals know.

• Investment properties sourced from 47 different developers • 63 projects currently under construction • We find investment opportunities across the country • Investment recommendations based on solid economic analysis • The service New Build-finding service is provided complimentary. We are paid by the developer when we find the right investment property for you.

The simplest way to become a property investor.

Go to www.opespartners.co.nz to learn about our New Build finding service.

Trade with an Award-Winning Forex Broker • Industry leading low spreads • Licensed, award-winning broker • Outstanding customer support 24 hours a day • Founded and operated in Auckland, New Zealand • 300+ tradeable instruments including currency pairs, indices, gold, silver, and oil

Derivatives are issued by Black Bull Group Limited. Please visit our website for our PDS. Trading derivatives is risky.

@blackbullmarkets @blackbull_markets @blackbullforex

“ We exist to make

money for clients, so performance matters more than growing our customer base ”

M I K E TAY L O R Founder & CEO

Our Our Philosophy Philosophy Our goal Our goal is to is focus to focus first first and foremost and foremost on client on client returns, returns, and to and provide to provide investors investors with with outstanding outstanding clientclient service. service.

We offer We offer our investors our investors a unique a unique approach approach to funds to funds management, management, and believe and believe this sets this sets us apart us apart fromfrom the rest. the rest.

The industry The industry has recognised has recognised Pie’sPie’s achievements achievements via numerous via numerous awards awards and and accolades accolades over over the years, the years, but we butare wemost are most proud proud of theofwealth the wealth we have we have created created for our forclients. our clients.

NowNow overover a decade a decade on, and on, Pie’s and Pie’s philosophy philosophy remains remains the same. the same.

We are We are committed committed to smart to smart investing, investing, providing providing above-average above-average returns returns and, and, mostmost of all,ofwe’re all, we’re dedicated dedicated to our to clients. our clients.

Why Why Pie Pie Funds?

Funds?

1. SKIN 1. SKIN IN THE IN THE GAME GAME Investing Investing for usfor is us personal. is personal.

A lotAoflot our ofPie ourstaff, Pie staff, directors directors and shareholders and shareholders havehave theirtheir personal personal money money invested invested alongside alongside our clients. our clients.

2. ACTIVE 2. ACTIVE PERFORMANCE PERFORMANCE We’reWe’re committed committed to active to active fundfund management, management, providing providing above-average above-average returns, returns, and generating and generating long-term long-term wealth wealth for our forclients. our clients.

3. BOUTIQUE 3. BOUTIQUE SERVICE SERVICE Pie Funds Pie Funds grewgrew out of out Mike of Mike Taylor Taylor investing investing money money for family for family and friends. and friends.

You’re You’re not just not ajust number. a number.

We have We have an absolute an absolute commitment commitment to providing to providing excellent excellent communication communication and service. and service.

Boutique.

Boutique.

Bespoke.

Bespoke.

ForFor you. you.

Contact Contact us onus09on486 09 1701 486 1701 or email or email info@piefunds.co.nz info@piefunds.co.nz to find to out findhow out how we can we help can help you. you.

P I E FP U I ENFDUSN. C DO S.C NO Z.NZ

P I EPF I UE N F U D N S .DCSO. .CNOZ. N Z Information Information is current is current as at May as 2021. at MayPie 2021.

Funds PieManagement Funds Management Limited Limited is the manager is the manager of the funds of theinfunds the Pie in Funds the Pie Funds Management Management Scheme.Scheme.

Any advice Anyisadvice given is bygiven Pie Funds

by PieManagement Funds Management Limited Limited and is general and is general only. Our only. advice Ourrelates advice only relates to the only to the specific specific financialfinancial productsproducts mentioned mentioned and does and notdoes account not account for personal for personal circumstances circumstances or financial or financial goals. Please goals.see Please a financial see a financial adviser adviser for tailored for tailored advice. You advice. mayYou have may to have pay product to pay product or otheror fees, other likefees, brokerage, like brokerage, if you act if you on any act advice. on any As advice. manager As manager of the of the Pie Funds PieManagement Funds Management SchemeScheme investment investment funds, we funds, receive we fees receive determined fees determined by your by balance your balance and we and benefit we financially benefit financially if you if you invest ininvest our products. in our products.

We manage We manage this conflict this conflict of interest of interest via an internal via an internal compliance compliance framework framework designeddesigned to help us to help meetus our meet our duties toduties you. For to you. information For information about how about wehow can help we can you, help ouryou, duties ourand duties complaint and complaint processprocess and howand disputes how disputes can be resolved, can be resolved, or to seeorour to see product our product disclosure disclosure statement, statement, please visit please www.piefunds.co.nz. visit www.piefunds.co.nz.

Please let Please us know let usif know you would if youlike would a hard likecopy a hard of copy of this disclosure this disclosure information. information.

Past performance Past performance is not a is guarantee not a guarantee of futureofreturns. future returns.

ReturnsReturns can be negative can be negative as well as as positive well as positive and returns and returns over different over different periods periods may vary. may vary.

Subscribe to Informed Investor/JUNO for just $20 For 4 issues (one year)

14

Contents IN THIS ISSUE

REGULARS

16. JUNO Exchange Speakers on businesses, property investment and financial advice brought readers to this JUNO event.

22. What We Like We find the hottest products, services, and places.

54. Subscribe

Subscribe to Informed Investor/JUNO for a limited time for just NZ$20 a year, at www.junoinvesting.co.nz.

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

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

10 JUNO |

WINTER 2021

22

crane-brothers.com

26

40

44

80

YOUR INVESTING

26. Live Like a Millionaire – for Less

52. Where Did All the Money Go?

You don’t have to be a millionaire to live like one. Spend differently and live a rich-lister’s life, says Amy Hamilton Chadwick.

If you’re earning more but don’t seem to be better off, you could be suffering from ‘lifestyle creep’, says Lynda Moore.

30. How to Become a Millionaire

58. Make Life Easy When You Retire

Is there a fast track to wealth? Martin Hawes looks at three ways of getting rich.

You might hope to become a millionaire, but when you stop work, how do you turn investments into an income?

36. Exodus from Auckland

62. Stop Buying Lotto and Hit the Jackpot

Aucklanders are fleeing the city. Ben Tutty asks why people are leaving the big smoke.

How much richer would you be if you didn’t buy Lotto tickets?

Diana Clement looks at the odds and the alternatives.

40. Look Twice as Rich

66. Is the Vaccine a Shot in the Arm?

New Yorker Vicky Oliver has observed what makes some people look rich. You, too, can look like a millionaire.

What impact will mass vaccination have on global markets?

Mike Taylor explains.

44. How Much Does It Cost to Raise a Child?

76. A Richer You, Using KiwiSaver

Being a parent has its joys – but it’s not cheap, so you’d better start investing now. Amy Hamilton Chadwick does the numbers.

In this extract from her new book, A Richer You, Mary Holm tackles questions from readers of her New Zealand Herald column.

48. I Was Lousy at Giving. How About You?

80. Millionaires Don’t Have Jobs

Generosity wasn’t one of comedy writer Dean Watson’s strong points, but he changed. He explains how to form the habit of giving.

The world’s richest people tend to have founded their own empires. Ben Tutty finds millionaires make their own jobs.

12 JUNO |

WINTER 2021

YOUR INVESTING Property

86. Buying Off the Plans If you want to develop your section or buy a new build to rent out, purchasing off the plans could be the answer.

92. Become Friends with Debt Should you pay off your mortgage or reinvest? You’ll get rich faster if you use the bank’s money, says Andrew Nicol.

96. Will House Prices Keep Rising?

Wendy Alexander of the REINZ looks at her crystal ball to predict what could happen next in the housing market.

100. Business Vision Brenda Ward showcases innovative Kiwi companies that are working smarter to bring you business that inspires.

86

92 LIFESTYLE

The Good Life

102. Save & Splurge Splash out on the big pieces that matter in your décor, then enhance with low-cost accessories.

104. Cooler Classics Invest in fewer clothes for winter, but make sure they’re quality garments.

106. The Destitute Gourmet ‘Destitute Gourmet’ Sophie Gray says she wants to cook and eat tasty, healthy, fashionable food that doesn’t cost a fortune.

110. Travel (Almost) Free You don’t have to be a millionaire to travel well and explore New Zealand – and the world, says Ben Tutty.

104

106 YOUR INVESTING Market Reviews

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

116. Snapshot We take a look at some of the events around the world affecting the global economy.

118. Bitcoin is Outstripping All Other Assets Mark Wong from Altcoin Ignition explains why Bitcoin has value, what Ethereum is, and checks out altcoins.

120. Share Market Lessons Investors have been on a rollercoaster ride in the past 15 years. Chris Smith looks back and reflects on his learnings.

118 14 JUNO |

WINTER 2021

120

124. The Big Bounce Back The Covid-19 recession may be deep, but the world economy should make a complete recovery, says Andrew Kenningham.

Join the best performing KiwiSaver fund over the last 3 years

nz funds

KiwiSaver Scheme Growth Strategy Based on average annual returns for the past 3 years, after fees before tax. Publicly available information from Morningstar and data from FE Analytics. Past performance may not be an indicator of future return. New Zealand Funds Management Limited is the issuer of the NZ Funds KiwiSaver Scheme. A copy of the product disclosure statement is available at nzfunds.co.nz/KiwiSaver.

REGULARS

Super Secrets of Investing Property, buying a business, and having a lifetime investing strategy were top of the agenda at JUNO’s latest reader event.

Readers of JUNO flocked to hear three inspirational speakers at the Autumn issue JUNO Exchange event on 18 March.

Attendees could also check out the exciting new BMW M3, because the event was held at Continental Cars BMW’s new state-of-the-art showroom, by the Northern Motorway in Wairau Road, on Auckland’s North Shore.

The first speaker was ABC Business Sales managing director Chris Small, who pointed out the benefits of buying a business over other forms of investment.

When the bank offers around 1 per cent, property returns you 3 to 5 per cent, and the share market offers 3 to 5 per cent, buying a business gives you a greater return on investment, he said.

Small explained that purchasers buying a business usually pay from three to five times its annual profit, which equals an annualised return of 20 to 35 per cent pre-tax.

Buying a business was more fail-safe than starting one, he said – about one in nine new businesses fail, where nine out of 10 established businesses are successful.

Financial adviser Jonty Horrocks of Element Financial told the event the best way to invest for your age was to set an end goal of the kind of lifestyle you want at retirement, then work back to what you have to do right now to achieve it.

Horrocks said it was never too early to start investing for your children’s future.

When your child is born, just start putting $500 a year into a KiwiSaver account for them, he said.

16 JUNO |

WINTER 2021

Compounding interest, plus employer and government contributions after they started working, would grow that amount to around $200,000 when they’re at the age of buying a house, he said.

“That’s a great way to help your children get onto the housing ladder,” he said.

Young couple Rachel and Chad Evans talked about their property investing lifestyle.

They found themselves with a new baby, no jobs and were forced to take Work and Income handouts for three months. But never again, says Rachel Evans.

They looked at our lives and thought: “Is this all there is? There must be a better way than working nine to five.”

Their first house was a total do-up in Wellington that had been flooded, but after renovation its large site in an industrial area meant that house turned out to be one of the most valuable of their portfolio.

As that home’s value grew, they leveraged from that first home to buy an investment property, then two, and now have a portfolio of 12 properties.

They intend to sell half the properties later in life, to live mortgage-free, to spend time with their three kids, and grandkids when they have them, and to travel.

The next JUNO Exchange event will be in mid-June. To hear about upcoming events and get investing stories delivered to your inbox, go to www.junoinvesting.co.nz/subscribe and sign up to our newsletter.

WINTER 2021

|

JUNO 17

EDITOR’S LETTER

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

Do You Have What It Takes to Be Rich?

In this issue, we show you that it’s possible to live a wealthy lifestyle on an ordinary Kiwi’s income.

You probably could have guessed this, but studies have proven it. Superrich people as a group are just different.

They’re more likely to be emotionally stable, more likely to be extraverted, more open to new experiences, more likely to avoid conflict, and more conscientious than the rest of us.

Best of all, they’re more likely to feel in control of their own destiny, says sociologist Rainer Zitelmann. They take the credit (and the blame) for their own actions.

The good news is that it’s not too late for you, because people can change. If you work hard at getting those skills, you’ll have a better chance of becoming one of the superrich.

‘Get rich slowly’ I imagine you’re reading this magazine because you’re hoping your investment strategy will help you get rich.

But the reality is, that might take time because investment isn’t about ‘getting rich fast’. It’s usually more about getting rich slowly.

Until then, you might need to compromise on a few things – so we have some ideas for you.

In this issue, you’ll discover that you can live

your dream lifestyle now for less money, that being frugal now will make you richer later, that you can easily holiday for free, and that you can look wealthier simply by buying the right clothes.

And we have four case studies of inspirational Kiwis who’ve changed their lives and their family’s lives with smart investing.

This is the last time you’ll be getting a magazine called JUNO, because we’re getting a new name for our next issue: Informed Investor. It may be a new name, but we’ll be the same magazine, put out by the same team, featuring the same experts, and published by the same owner.

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

Of course, you can fake it until you make it, but the best strategy is simply to get rich. We have the answer for that too. Martin Hawes tells you there are three main ways to get rich any of us can try.

Enjoy!

Brenda Ward JUNO Editor

Resident economist Ed McKnight

Art Director Mark Glover

Printer Ovato Print

Advertising Manager Anita Hayhoe

Distributor Ovato Distribution

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

If not satisfied with the response, the complaint may be referred to the Media Council PO Box 10-879, The Terrace, Wellington 6143; info@mediacouncil.org.nz. Or use the online complaint form at www.mediacouncil.org.nz. Please include copies of the article and all correspondence with the publication.

WINTER 2021

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.

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

18 JUNO |

JUNO is an investment magazine published quarterly by Brenda Ward. You need JUNO magazine’s written permission to reproduce any part of JUNO.

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 anita@ junoinvesting.co.nz about advertising.

JUNO is printed on environmentally responsible paper. The paper is produced using elemental chlorinefree pulp, sourced from sustainable and legally harvested farmed trees.

The magazine is recyclable.

PRINT ISSN 2422-894X DIGITAL ISSN 2422-9741

You see the real value of an asset.

You see the opportunities where others see barriers. So, you need a lender partner who can back you and your vision.

Whether you are just starting out on your first investment property or you’re a seasoned pro, Resimac has a mortgage solution that could help you capitalise on the next opportunity!

Residential mortgage rates for investors from:

2.89

%* pa

fixed for 2 years

Talk to your mortgage broker or visit resimac.co.nz/investor *Interest rates are available for new eligible loan and are subject to change. Your interest rate may differ depending on borrower category, security use and how much you borrow relative to the value of your property. Final approval is subject to credit assessment.

Terms, conditions and additional fees and charges apply. Resimac NZ Home Loans Limited.

Meet some of our

Contributors

WENDY ALEXANDER

CAMERON BAGRIE

MARK WONG

Wendy is a fellow of REINZ, has been a regional director for eight years and has been in real estate for nearly 40.

She’s been a CEO of real-estate firm Barfoot & Thompson.

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.

Mark is the owner and lead technical analyst at Altcoin Ignition, a private cryptocurrency trading community. He’s been involved with cryptocurrency since 2017.

ED MCKNIGHT

LYNDA MOORE

ANDREW NICOL

Ed McKnight is JUNO’s economist.

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

Now he crunches data for JUNO magazine and Opes Partners.

Lynda Moore spent 20 years in her own accounting practice before co-founding Money Mentalist.

She blends psychology and neuroscience with money coaching.

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

20 JUNO |

WINTER 2021

MARTIN HAWES

MARY HOLM

ANDREW KENNINGHAM

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

Mary writes in the Weekend Herald, presents a financial segment on Radio New Zealand, and is a bestselling author. She’s a director of the Financial Markets Authority.

Andrew is the chief Europe economist for Capital Economics.

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

CHRIS SMALL

CHRIS SMITH

MIKE TAYLOR

Chris Small is the Managing Director of ABC Business Sales.

He has a background in banking and finance spanning 20 years, here and overseas.

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

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

WINTER 2021

|

JUNO 21

REGULARS

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

Diamond life Want to be noticed? This stunning watch from Patek Philippe is more a bracelet than a timepiece and is certainly signal that you’ve invested wisely.

This Nautilus Haute Joaillerie watch has just been released in rose gold. It’s entirely paved in 2,553 diamonds snow-set on the case, bezel and bracelet, a total of 12.69 carats of diamonds.

On the dial, the rows of stones are set in the small, raised, wave pattern used by all the watches in the women’s Nautilus collection.

At night, the watch’s luminescent-coated hands, hour-markers and Arabic numerals glow so you know when you’ve reached the Cinderella hour and it’s time to head home.

It’s self-winding with a transparent sapphire crystal case-back and is water-resistant to 30 metres. www.partridgejewellers.com

Cosy comfort If you’re a fan of Allbirds shoes, walk this way. You’ll love the new Allbirds women’s jumpers.

Allbirds have re-engineered the signature soft and cosy merino wool used in their shoe uppers to create a stylish and sustainable sweater.

An elevated cool-weather layer crafted with premium natural materials, the Wool Jumper is dense, loose-fit, and built to be your go-to year after year.

It’s made of 100 per cent ZQ Merino wool, to keep you warm as the temperature drops.

They’re NZ$240 and available in Aspen (baby pink) and Juniper (a green/grey blend). www.allbirds.co.nz 22 JUNO |

WINTER 2021

W H AT W E L I K E

Going up in the world Want to live like a millionaire?

A luxury apartment in a landmark highrise apartment tower can be yours for a weekend, a week or as long as you want.

Auckland’s brand-new Pacifica building offers sophisticated living and uninterrupted views across Auckland and Waitemata Harbour.

Now you can enjoy short-term stays in the building, through Urban Butler Residences.

“Urban Butler Residences has been appointed the exclusive providers of shortterm living in this brand-new building,” says Jon Lawry of Urban Butler.

“There’s been a shortage of luxury

accommodation in Auckland city,” he says.

“We’re meeting that need with Pacifica’s carefully curated apartments, offering spacious and sophisticated living, with floor-to-ceiling windows boasting unbelievable panoramic views.”

He says the apartments follow international trends towards short-term residential apartments with hotel-like amenities.

Guests at the Pacifica enjoy a 20-metre indoor-outdoor lap pool, a fully equipped gymnasium, spa pool, state-of-the-art sauna and steam room, a bookable cinema room, an extensive outdoor area with barbecue facilities, and 24/7 concierge and valet services.

In the apartments, you’ll find all modern essentials, including high-speed unlimited Wi-Fi, meticulous housekeeping, luxury bathroom amenities, and a fully equipped kitchen with cooking essentials and a coffee machine.

You might want to stay in your apartment all day, says Lawry, but you should head out to explore the vibrant city and its nightlife.

The Pacifica is only seconds away from the bustling Britomart precinct, the Viaduct Harbour, Wynyard Quarter, the ferry terminal, cafes, restaurants, bars, and exciting new laneways.

Apartments are available now.

Go to www.urbanbutlerresidences.com to inquire.

WINTER 2021

|

JUNO 23

24 JUNO |

WINTER 2021

ISSUE 29

WINTER 2021

Millionaire (noun)

A millionaire is a very rich person who has money or property worth at least a million dollars.

– Collins Dictionary

“

Too many people spend money they earned to buy things they don’t want, to impress people that they don’t like.

– Will Rogers

”

WINTER 2021

|

JUNO 25

PERSONAL FINANCE

Live Like a Millionaire – for Less You don’t have to be a millionaire to live like one. Approach your spending differently and you, too, can start to live a rich-lister’s life, says Amy Hamilton Chadwick.

How would you live if you were wealthy?

What would you spend more on? What matters most to you?

Is it giving up work and having the freedom to do what you want?

Or is it living in a mansion? Driving European cars? Eating out at restaurants?

Luxury holidays? Having staff?

You might not have the budget now to afford your fantasy lifestyle, but there’s no reason you can’t get a wealthier experience out of your day-to-day living, for less.

Using your money intelligently can help you enjoy some of the experiences that sound like a millionaire’s lifestyle to you.

Claire Matthews, Associate Professor at Massey Business School, says wealth isn’t necessarily being able to afford anything you like.

“It’s more about having control over your money and being able to afford the things that are really important to you,” she says.

“For some people it’s travel, for others it’s relaxing at home, volunteering, spending time with the family or just reading that big pile of books.”

Your priorities The trick to living like a millionaire on a

budget? First, identify your ‘millionaire’ priorities.

“It’s no use being in a coffin with a huge fortune.”

Then work out where you can cut back so you can spend more strategically.

Pay someone else to do it Buying your way out of unpleasant jobs is a highly effective way to improve your happiness, according to a 2017 Harvard Business School study.

Being conscious of your spending, rather than acting on autopilot, is a way to get the most value out of every dollar, says Lisa Dudson, financial adviser and owner of Acumen.

“With more awareness, you can make different decisions, so you’re not living life on a hamster wheel.

“Get creative, pay attention and make conscious spending choices.”

Spend less than you earn Ideally, the best way to live a wealthier lifestyle is by investing wisely and becoming genuinely wealthy.

But by spending less than you earn and investing the rest, you can create significant wealth in your lifetime.

But don’t forget to spoil yourself a little, says Matthews.

“There’s no point having a frugal lifestyle all through your twenties and into your fifties so you can have an extravagant retirement. The unfortunate reality is that you might not get there.

Have a fresh, clean house by simply hiring a cleaner for a couple of hours a week. That can take an unpleasant job off your list, cut household arguments and give you more time, all for roughly the cost of a restaurant dinner for two.

Take your annual leave Many Kiwis take a strange pride in how many days of holiday leave they’ve accrued, but does your dedication to your job mean you’re missing out on life-enhancing experiences?

Use your leave to take more holidays, spend more time with your family, or have a day of utter extravagance that you’ll never forget.

Opulent holidays If you want to feel as though you’re living a luxury lifestyle, it might be as simple as swapping six nights in an Airbnb for one night in a five-star hotel.

It might be chartering a boat for two nights for you and your partner, rather than giving each other Christmas presents.

WINTER 2021

|

JUNO 27

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

Hunt for bargains Dudson loves to dine out and often uses the First Table website to get 50 per cent off her food bill by booking early-bird tables.

She says you can also buy the Entertainment Book and check GrabOne regularly, while the website 1-day has deals on electronics, toys, clothing, travel and more.

“Just generally look around for special offers – you work hard for every dollar, so make sure you spend it in a way that delivers value.”

Rent that mansion When you ask about wealth, Kiwis tend to talk about their houses, rather than possessions. That can make it very hard to feel wealthy if you rent.

However, the more you spend on a rental in New Zealand, the more value you’ll tend to get for your money.

Cheap houses often cost 4 per cent to 5 per cent of their value to rent each year, while multimillion-dollar houses will rent for 1 per cent to 2 per cent of their value.

If you want to live like a millionaire, why not rent a beautiful house, if you can afford it?

Future classic cars Love a specific car brand but can’t afford it? Look for ‘future classics’ from the 1990s and early 2000s to get the premium badge you’re passionate about at a price that works for you.

You’ll need to do your research so you don’t buy a lemon, but some day in the future, provided you can afford the maintenance and you keep the kilometres down, your classic car could be worth more than you paid for it.

Wealth is more than money “Don’t forget it’s not just about financial wealth – it’s also about the type of life you have, your opportunities, your family and your health,” says Matthews.

“I’d encourage you to think about that as well!”

Wealthy people will be the first to tell you that money isn’t everything. You can’t enjoy your wealth if you’re unwell, lonely, bored, or miserable.

Take care of yourself and the people you love, so you can spend more time together and build happy memories.

28 JUNO |

WINTER 2021

catalystfinancial.co.nz

Better Outcomes.

Now. Catalyst mortgage advisers get you the money to invest in property.

Most people have dreams. They dream about building a better life, a future that’s going to be substantially different from today’s reality. But, most people wait.

They wait for something to happen – someone to tap them on the shoulder. Something to change. They need something to spark them into action, an idea, a meeting, a new insight to cause that change and drive us all forward. In short, they need a catalyst.

For more information go to www.catalystfinancial.co.nz

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

30 JUNO |

WINTER 2021

PERSONAL FINANCE

How to Become a Millionaire Is there a fast track to wealth? Martin Hawes looks at three of the most popular ways of getting rich.

Do you want to be a millionaire?

If you define ‘millionaire’ as it used to be (a net worth of NZ$1 million) becoming a millionaire is pretty easy.

Just buy an average Auckland house and spend a couple of decades paying off the mortgage.

Of course, that’s not what this story is all about – a ‘millionaire’ today is not what it used to be.

What you really want to know is how to become rich. Stinking rich.

There are some well-worn paths to wealth.

Here are some of them.

Build a business Perhaps the track taken by most rich people is through building a business.

Throughout, there will be adaptation and change – and hard work. Lots and lots of it.

Successful business owners eat and breathe their businesses.

To go into a business with the aim of making it substantial will mean a lifetime of work which is anything but nine-to-five, five days a week. Even when you’re not ‘working’, the business looms and is always in your thoughts.

Even with all this time, effort, and energy, building a business is uncertain.

To create a good, profitable business that can be sold means every aspect has to be right; and markets, along with customers, can be fickle.

This is frequently where business owners become an overnight success – after, perhaps, 25 years of grind.

Property The second way to wealth is through property.

The path to a decent-sized business which can be sold later to provide a family with the three ‘B’s (the boat, the bach and the BMW) is usually torturous.

For as long as I’ve been interested in property (about 40 years) I have watched many, many people become wealthy through property.

It usually starts as a micro-business (often just one person) with a mortgage taken out against the house.

Over that time, markets have performed well, and regulation has been loose, making it an almost one-way bet for those who can live with borrowing lots of money, and are ready to put in the work.

It will go through a multitude of phases and changes. The final result will probably look very little like the original enterprise.

Between the optimistic launch and the excitement of a sale lie anxiety, despair, fear, and knife-edge positions which could see a tumble to oblivion.

Times have changed.

Housing is really a public policy issue, so politicians will always have their say on the state of the market and how tenants should be treated.

This past year has been an excellent case in point because the Government has been interfering in the market for residential property.

You need to approach property cautiously now. It might no longer be the relatively easy path to wealth fuelled by other people’s money that it once was.

New laws make property a more difficult investment which needs a professional approach.

Among recent changes are the Healthy Homes Act, aimed at making rental properties warmer and drier; and changes to give tenants a better deal in the Residential Tenancies Act. And there are tougher taxes.

There’s a new ‘Brightline Test’ timeframe of 10 years before you can get tax-free profits from selling a rental property. Nor can you claim interest as an expense in your tax return any longer.

The good news is New Zealand has a housing shortage, so values and rents are likely to keep going up.

As well, governments of different hues have all said they don’t want to see a major fall in house prices.

Property will still make some people wealthy, but it will need careful, smart thinking – and a good deal more risk.

Save part of your income And then, third, you can save your way to wealth.

WINTER 2021

|

JUNO 31

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

This is probably the safest and surest way to wealth, even if it is the slowest – it’ll take decades to get rich this way.

This is mostly because you’ll rely on compound interest to take you to wealth and that takes time.

In fact, there are two things that will affect how long it takes to save yourself to wealth: 1. How much you save. Obviously, the more the better, but it’s not enough to simply say ‘save more’. The best way to save is to take a percentage of your income and save that – for example, you may decide early to always save 10 per cent of everything you earn. This means that after this has been saved and invested, you’ll have the rest to live on and spend any way you like.

2. How you invest. You need a good, consistent investment strategy. That’ll be one which has a high proportion of your money invested in shares and listed property. Many people will choose not to do the investing themselves, but instead use a fund or a financial adviser to invest for them. This frees up their time to advance their careers, so they earn more to invest.

Get a goal There may be other ways to become wealthy, but these are the main paths I see working.

Set yourself a goal. What would be enough wealth for you? Then, select which path you’ll take. If you can get this right, you’ll have a path well worth treading.

Sustainable.

Professional.

Deductible.

A bonus of investing in forestry is that around half of your total contributions are tax deductible.

Also attractive is that our forests are a renewable resource offering real returns.

Invest in sustainable forestry with New Zealand’s original and most successful forestry investment manager.

The information contained in this article is general in nature and is not intended to be personalised financial advice.

Before making any financial decisions, you should consult a professional financial adviser.

Martin Hawes believes this information is correct, and he has reasonable grounds for any opinion or recommendation on the date of this publication. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell or retain a regulated financial product. Martin Hawes accepts no responsibility for any loss caused as a result of any person relying on any information in this publication.

forestenterprises.co.nz

ADVERTORIAL

Property Funds or Syndicates?

If you can’t afford to buy a commercial property outright, maybe you’re weighing up between investing in a syndicate or a property fund. Rory Diver, PMG’s Investor Relationships Manager, suggests you first look at the pros and cons.

Many people think property syndicates and property funds are the same thing, but they’re fundamentally quite different, with different advantages and risks. Here’s how they work.

A property syndicate is a direct property investment – typically just one property, which is leased to one or more tenants, and many investors become part-owners of that property. Returns come from the rent and capital growth, after costs.

With an unlisted and diversified direct property fund like those managed by PMG, you also invest alongside a pool of other investors, but across many properties, property types, locations, and tenants from different sectors.

That means your interests are spread across more properties and tenants. PMG investors tell me that gives them greater confidence in having a long-term, reliable, and sustainable income.

What are the benefits?

Investing in a property syndicate can offer attractive gross cash returns, especially when compared to bank term deposit rates.

And you can also get good returns from a property fund – with two extra benefits.

1. Cash returns may be more reliable and consistent than a syndicate, as there are typically more properties and tenants in a fund. That's what 'diversified' means – lots of eggs across multiple baskets.

www.pmgfunds.co.nz

2. It may be easier to sell your investment in a fund than in a syndicate as funds generally have a smaller minimum investment requirement, which gives you access to a larger pool of potential buyers when you sell.

What are the risks?

Well, there are risks for any investment, but a fund aims to spread the risk over a wider range of properties.

Property syndications have been popular over the last few decades. They can look attractive because of the good returns of property over recent years, but markets and global economies have become more volatile, as we saw with COVID-19 last year.

One of the weaknesses of the syndication model is its lack of diversification.

Syndicate investors typically rely on a small number of tenants, or even just one tenant, to keep paying rent on just one property. If those tenants can’t pay the rent, investors may quickly notice an impact on returns.

Other potential risks of syndicate returns are empty tenancies; when a tenant fails to pay rent or their outgoings; plus there could be increasing fees, higher interest rates, and general operational costs, maintenance and repairs.

Those risks are similar for other property investment models, like funds, but funds

aren’t as reliant on individual tenants.

Their risks are spread across many tenants, properties, locations, and sectors.

On top of that, syndicates typically have no fixed term, which might make it harder for you to exit your investment. If one tenant or property doesn’t perform as expected in a fund, the others may prop up the returns, lessening the impact to your portfolio.

Funds are well regulated Both a statutory supervisor and the Financial Markets Authority (FMA) oversee investment schemes like the ones we offer at PMG and oversee licensed scheme managers. This means, by law, managers of these schemes have to give a high level of transparency on their investment offers. We’re closely monitored, which offers investors regulatory protection.

Not all property funds managers are created equal either. If you’re placing your hard-earned cash in the hands of a fund, it’s important to choose a manager with a proven history, strong governance, and who is ideally licensed under the Financial Markets Conduct Act 2013.

Information is correct as of 1/05/2021 and contains the opinion of Rory Diver and general commentary and views from PMG. Any information provided in this article is provided for information purposes only, is not intended to be relied upon, and should not be construed as financial advice. Prospective investors are recommended to seek professional advice from a Financial Advice Provider who takes into account their personal circumstances. Past performance is not a guarantee of future performance. PMG holds a ‘Managed Investment Scheme’ licence under the Financial Markets Conduct Act 2013.

L I G H T H O U S E F I N A N C I A L W E A LT H S E R I E S

From First Home to Second Home Do you want to get into property investing? Financial adviser Andrew Armstrong of Lighthouse answers your questions.

Q

How will the new changes affect me if I want to buy my first investment property?

A

Removing the ability to deduct interest is a big change for property investors, and may impact your ongoing cashflow.

Think hard about this when you’re weighing up a potential investment property, as relying on the net rental income to provide a return after tax will make some investment properties financially unviable.

These changes will shape the type of property that investors are looking to buy.

With the bright-line test for existing properties being extended to ten years, new-build properties at just five years may become more attractive to investors.

These changes are likely to push up newbuild property prices as they become more attractive for investors and the demand increases. This will have an impact on firsttime investors and first-home buyers who are competing for the same properties.

Q A

What do you think, should I buy old or new?

There are pros and cons for each, but new-builds will have a lower brightline than older, existing properties, so they may fit your investment horizon better.

New-builds also need a lesser deposit, which makes them more affordable.

Another key advantage to new-builds 34 JUNO |

WINTER 2021

and turn-key properties is that you’re not usually buying at auction because they’re generally sold at a fixed price.

This means there’s less chance of catching ‘auction fever’ and potentially overpaying.

Regardless of the type of property you’re buying, our advice is to do the cashflow numbers and build in some contingency.

This covers you for possible interest rate rises in the future, or unexpected property costs.

Q A

Refinancing, what are my options?

Dollar-for-dollar refinancing is exempt from Reserve Bank rules and gives you a chance to get the best market rates and contributions, irrespective of your overall loan-to-value ratio (LVR).

By splitting your banking across several lenders, we can take advantage of the

different banks’ valuation and lending policies.

Say you’d have 75 per cent LVR if you had both loans with one bank. By splitting the loans between Bank A and Bank B, you might meet their criteria.

As interest rates continue to drop, it’s more attractive for investors to ask their own bank for a better rate and compare these with interest rates from other lenders.

Outside the main banks, we find secondtier lenders are giving competitive interest rates and attractive LVRs. They’re a great option if you’re looking to refinance and increase your total lending to a position a main bank might not like.

Q

I had finance approved recently but things changed for me. Should I lose hope?

A

Absolutely not. We often see this where customers are buying new-builds and

ADVERTORIAL

Mortgages

Wealth

Trusts

Accounting

Property investor Lawrence, one of our clients, had a medical incident and was off work for months.

their position changes between the initial approval and final approval prior to draw-down.

It’s always a good idea to discuss potential changes in your circumstances with your mortgage broker or banker before you sign up for a property purchase with a long settlement over a new-build or turn-key purchase.

We work with second-tier lenders to make sure you’re able to meet your settlement even if your existing bank can’t help. There are alternative financing options available to help you settle on a property, should the worst occur.

People often think of non-bank lenders as loan sharks who charge 1000 per cent interest. Actually, that couldn’t be further from the truth.

Non-bank lenders can offer rates around 1 per cent over what you’d pay at a main

bank and often have more relaxed credit policies and repayment terms.

Q A

Is it worth renovating my rental property?

Yes, absolutely. We call it the RR and R strategy: Renovate, Revalue and Release your additional equity towards your next deposit.

As long as you don’t overcapitalise, renovating can give you more reusable equity than the amount you spent on it.

This equity increase, plus regular capital gains, can be a great boost into your second property.

Any questions, call Andrew at Lighthouse, 027 2240159, or email AJ@lighthousefinancial.co.nz.

And check out our podcast, Cheques and Balances.

His investment lending was in jeopardy. Despite being with his bank for over a decade it wouldn’t help him, and selling houses seemed like his only choice.

We packaged up his application in a way that was attractive to a new bank but kept some lending with the existing bank.

We were able to shift 80 per cent of the portfolio across to a new bank on interest-only, which improved his cash flow. That meant he could clear some other debt and didn’t have to sell any of his houses.

Within a year he'd bought three more investment properties. Now, we’re working with him to finance a bigger family home.

www.lighthousefinancial.co.nz

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

36 JUNO |

WINTER 2021

PERSONAL FINANCE

Exodus From Auckland Aucklanders are fleeing the city as they hunt for cheaper houses, a lower cost of living, and a better lifestyle. Ben Tutty asks why people are leaving the big smoke.

$1 million. That’s not this week’s Powerball jackpot, it’s the median house price in the Auckland region as of January 2021, according to the Real Estate Institute of New Zealand.

After years of increasing unaffordability, some Aucklanders have had enough.

They’re turning their backs on the big smoke and moving to smaller centres in search of a better, more affordable lifestyle.

What it costs to live The easiest way to illustrate the difference in cost of living between Auckland and other centres in New Zealand is to look at median house prices:

Auckland: NZ$1,000,000 Tauranga: NZ$854,000 Wellington region: NZ$792,000 Hamilton: NZ$655,000 Palmerston North: NZ$650,000 Dunedin: NZ$618,000 Christchurch: NZ$520,000

If you bought at the median price in Christchurch, your yearly mortgage repayments could be around $18,200* less than if you did the same in Auckland.

“I recall looking at the same size new-build houses in Riverhead in Auckland, being built by the same builders – but for NZ$1 million to NZ$1.2 million.”

That’s close to NZ$20,000 a year to spend on travel, investments, or 827 servings of avocado on toast at Auckland prices.

Realestate.co.nz data suggests that Andrew is just one of many Aucklanders looking at leaving the big city.

Vanessa Taylor, head of marketing at realestate.co.nz, explains another problem.

She says Auckland’s house prices increase much faster than the rest of the country in nominal terms.

The number of searches by Aucklanders for properties in the Bay of Plenty on the site increased by 28 per cent in January alone, while searches in Canterbury increased by 37 per cent.

“When the Auckland market does increase in price, the percentage increase may be on par with other cities in New Zealand, but the actual dollar increase is usually much higher. That can make the market difficult, particularly for first-home buyers.”

Less traffic, more living Price dominates news headlines for the big city’s property market, but for many Aucklanders, it’s lifestyle that’s on their mind – and the lack of opportunity to enjoy life due to long commutes, the high cost of living, and long hours at work.

For Andrew, a finance business partner at an engineering firm, that price difference was enough to spur his move.

Despite living in Auckland since he was six, he moved to Tauranga, paying NZ$670,000 for a four-bedroom new-build in September 2019. He says the Auckland property market is “ridiculously overpriced”.

Iain Spanhake, a creative director who’d lived in Auckland for most of his life, moved to Hamilton three years ago for that very reason.

“I prefer the slightly more ‘chilled’ pace of Hamilton, the work/life balance and just how easy it is to live here,” Iain said.

WINTER 2021

|

JUNO 37

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

The lifestyle on offer in the city is improving fast, giving people like Iain even more reason to stick around.

“We were especially surprised by the quality of the cafes, restaurants, and trendy eateries popping up all the time … and the art culture is really taking off.”

But what about job opportunities? Surely many Aucklanders have considered leaving for the regions, but have been blocked by their need to earn a crust or grow their career?

Not so, says Vanessa Taylor. “Covid-19 definitely accelerated the transition to remote work. Now people are having a look at their lifestyles to see if relocating will mean a better lifestyle. In fact, one of our executive team just bought his first home in Christchurch and is now working remotely.”

Investing outside Auckland Another group of Aucklanders are buying investment properties outside Auckland due in part to the city’s high prices. I’m one of them.

Back in 2017, I personally started remote working as a freelance writer and bought a property in Dunedin – as both a home and as a future investment.

Ed McKnight, JUNO’s lead economist, says for investors and homebuyers like me who are priced out of Auckland, New Zealand’s smaller cities can be a great option. “We see a lot of investors in areas like Christchurch, purely because the average house here is around half the price.

“Plus, investing in smaller centres outside of Auckland is a great way to diversify risk in a portfolio – meaning if prices dip in Auckland, you’re less likely to see a drop in returns across your portfolio.”

Auckland property values stood still for three years until 2020, when they rocketed up by almost 20 per cent. As a result, we’re soon likely to see far more Aucklanders investing in the regions, he says.

“Because Auckland house prices are already so high, an increase of 20 per cent means huge equity gains.

Entries Invited Art Asian Art Decorative Arts Fine Jewels & Watches Fine Wines & Whiskies Collectors’ Cars & Motorcycles

Auctions Private Sales Valuations +64 9 529 5600 webbs.co.nz 33a Normanby Rd Mount Eden Auckland, 1024

“People can use that equity to buy investments in other, more affordable regions like Christchurch for example.”

What’s in the future for Auckland?

Auckland’s population and house price growth has been absolutely bonkers for almost 10 years and particularly over the past 12 months. But will it continue?

The city’s population reached 1.7 million at the end of 2020, according to estimates from Statistics New Zealand.

As high as this might seem, this is at the very lowest end of their forecasts for the super city’s population growth.

Covid-19 obviously played a huge role, but those numbers beg the question – is part of the reason for the city’s slowing growth because Aucklanders are leaving for greener (and cheaper) pastures?

Cheaper homes, remote working opportunities, less traffic, a better lifestyle, and more time to spend with family. It’s hard to argue with that. *Assuming a 2.5% interest rate and a 30-year loan term.

Right now, the auction market is red hot.

Are you looking for an alternative investment, or do you need to free up some capital?

Contact us today to learn about buying and selling at auction.

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

40 JUNO |

WINTER 2021

PERSONAL FINANCE

Buy a Third as Many Clothes and Look Twice as Rich New York City writer Vicky Oliver has observed what makes some people look rich and why others miss the mark. She says you too can look like a millionaire.

Career consultant Vicky Oliver says you might not be a millionaire yet, but she has some good news. There is a way to look the part on a modest allowance.

Oliver, who has written six books on how to get ahead in your career, says she came up with the idea for her book Live Like a Millionaire (Without Having to Be One) because she lives and works in New York, one of the most expensive cities in the world.

“It occurred to me that people just starting out in their careers don’t have a lot of money. Yet they are expected to play the part, wear the suit, ‘talk the talk’ long before they may be psychologically and financially ready.

“I began to think about tips I could give that would help people bridge this gap.

So, I wrote a book about stretching the dollars you have, making wise clothing investments, and dispensing with the stuff you don’t need.”

Oliver has 10 laws for dressing for success on a shoestring.

1. Don’t lose your shirt on ephemeral purchases Fashion is fickle and its whims are fleeting, says Oliver. Follow every passing fashion and you can lose your shirt (and it won’t even be in fashion next season, she laughs).

“You’ll get more stretch out of a style that will see you through season after season.

Opt for classic pieces over trends and start by building your wardrobe in one- or twocolour palettes.”

Mixing and matching will make your budget go further.

2. Divorce yourself from middle-of-theroadism Oliver says with clothing, middle-ofthe-road cuts with middle-of-the-road stitching, buttons, and seams will always look mediocre.

Middle-of-the-road means it’s not made well enough to be considered ‘uptown’ or luxe, and it’s too costly to be cool, she says.

But buying these garments is a hard habit to break.

3. Ride the escalators Middle-of-the-road thinking is a stranglehold, says Oliver. So, she suggests a field trip for research.

Find the most upscale department store in your nearest big city. Ride the escalator up to the most expensive floor, then give yourself permission to try on the designer items you could never afford.

But don’t buy them. Instead, just examine them to train your eye to recognise good quality.

WINTER 2021

|

JUNO 41

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

“When I buy a piece of clothing, I look at the seams, the buttons, and the stitching.

It should all be tight. The fabric should be fresh without shine. Nothing should pull.

Fewer quality items will last a lot longer than cheaper fare that wears out quickly.”

4. Follow the one-third rule If you don’t have a rich person’s budget, your spending can stay the same, but you should buy differently.

Buy a third as many clothes as you do now but spend three times as much on each item.

Instead of buying several pairs of work pants at middle-of-the-road prices, buy just one $2000 suit and never take it off, if need be, she says. “A pair of designer shoes crafted from Italian leather will last 10 years. A quality pair of cowboy boots could well outlive you.”

Clothing is an investment, says Oliver. Buy the best and give away the rest.

5. Stay out of outlet stores Bargain-lovers think they’re on a treasure hunt, but really, much of the stock in outlet stories is ordered for that shop, less costly but lower in quality.

42 JUNO |

WINTER 2021

6. White versus black White shrieks money, says Oliver. But you have to be wealthy to wear white. One tiny stain and the garment is no longer white. With every dry clean it gets a little more yellow. As an investment, white is a disaster, she says.

If you can afford one suit, it should be black for women and charcoal grey or navy blue for men. Black forgives a lot of debauchery, she says, hides extra kilos, and looks stupendous with any colour. Opt for wool, which preserves its colour longer.

Pair textures for a richer look. Pick contrasting textures particularly when the colours are a perfect match. Say, a cashmere sweater paired with black pleated pants.

7. Find your colour of money The richest colour is the one that makes your hair look lustrous and your skin radiant. Pick one or two colours to work with and one neutral to offset them, like black, grey, or brown.

“Each person looks divine wearing certain colours and not-so-great wearing other colours,” she says. “Stretching your dollar means figuring out which colours flatter

you, and buying a wardrobe in only those colours.”

9. Refuse to be a drone You can look rich and still be yourself, says Oliver.

The way to do that is to add to your outfits some accessory that is undeniably you – a leather jacket that screams ‘hipster’ when the rest of your wardrobe says ‘banker’, or a tie, belt, or watch that stands out.

Try red socks or a patterned vest with a suit; bright nails with a conservative dress.

That’s the key to a signature style.

10. Pandemic shortcuts One new law has come in over the past year, says Oliver. “During pandemic lockdowns, you only need to worry about the upper half of your body for a Zoom call.

“I have literally stopped worrying about pants and skirts and really focus now on the jacket I’m wearing.”

Live Like a Millionaire (Without Having to Be One) is available for Kindle on Amazon for $8.99. For more information see www.vickyoliver.com.

Looking for a rewarding lifestyle?

Neil Thomas saw solutions to problems – and turned them into successful businesses. That’s been his rewarding lifestyle for more than 20 years.

Now he’s enjoying a well-deserved rewarding lifestyle in semi-retirement too, having just sold his latest business, Naturally Organic, through ABC Business Sales.

We’ve been connecting people to business opportunities for 35 years.

ABC Business Sales brokers have unparalleled knowledge across a wide range of business categories and understand the dynamics that make a business successful.

This enables us to uncover potential, recognise true value and give you the best advice possible.

What inspires you? Turn it into your new career.

We’ll take you there.

If you’re thinking of buying or selling a business, call one of our business brokers now.

0800 180 122 LIC REAA 2008

Get your FREE guide to buying or selling a business now at www.abcbusiness.co.nz

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

44 JUNO |

WINTER 2021

PERSONAL FINANCE

How Much Does It Cost to Raise a Child?

Being a parent has its joys – but it’s not cheap. Add up 18 years of child-related expenses and you’ll find that you’d better start investing now. Amy Hamilton Chadwick does the numbers on having a kid in New Zealand in 2021.

Do you have a couple of kids? Brace yourself.

You’ll be saying goodbye to more than half a million dollars to see them through to adulthood.

An update of one of JUNO’s most popular stories shows we spend on average NZ$265,680 per child from birth to age 18.

That’s up NZ$15,000 from the $250,560 it cost four years ago.

It’s often said that it takes a village to raise a child. From a financial perspective, though, you’d better hope the village has a solid investment portfolio.

Raising children is a costly exercise, and the more you earn, the more you’re likely to spend.

education, and healthcare. Over the past four years, almost all these costs have risen.

The biggest gain has been in housing costs, with rents and house prices up significantly.

Interest rates are down, however, which may counteract these rises for families with mortgages.

Daycare fees have risen dramatically; the OECD estimates that a couple on the average wage will spend 27 per cent of their income to send one child to fulltime daycare.

School education costs have also gone up, but not by anywhere near as much – it can really be a relief when your child starts school.

In 2017, Juno published a story about the cost of raising a child in New Zealand.

This year, we’re revisiting that story to see what’s changed.

Food’s up, clothes are down The price of food has increased slightly; healthcare costs are up very slightly, but zero doctor’s fees for under-14s really help keep them down.

The direct costs The day-to-day expenses incurred by each child, either directly or as part of the family’s total bills, can be grouped into food, clothing, accommodation costs,

Expenditure on kids’ clothing has actually dropped, although spending on shoes has gone up. And the cost of holidays is down since overseas trips have been off the cards for the past year.

Then there are the optional extras: sports, music lessons, toys, and technology, for instance. And add in family holidays, private schooling, and extra tuition.

And do you need a bigger house with more bedrooms? The more money your family makes, the more you’ll tend to spend on your kids.

Those discretionary decisions are why there’s a big gap between what various Kiwi households spend.

Estimates range from about NZ$175 – NZ$500 per child per week, depending on your income. That’s a range of NZ$9,100 – NZ$26,000 a year, or NZ$163,800 – NZ$468,000 across 18 years.

For private education, add another NZ$12,000 – NZ$25,000 per year during school years.

And, as many parents discover, adult children can be the most expensive of all; the Bank of Mum and Dad is one of New Zealand’s biggest lenders when it comes to buying houses.

WINTER 2021

|

JUNO 45

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

The numbers Obviously, you didn’t have kids to turn a profit. You love the expensive little blighters.

But what costs does a Kiwi kid incur for direct costs alone?

We can make an educated guess based on local and Australian data, plus Inland Revenue’s August 2020 Household Expenditure Guide and Otago University’s Food Costs report 2019.

This covers 18 years of costs, averaged out to one month, so your child will probably vary depending on their stage of life and your choices for them:

Food

NZ$340

up 7%

Housing and utilities NZ$237

up 1%

Education (public school)

NZ$60

up 50%

Activities

NZ$63

up 5%

Holidays

NZ$85

down 10%

Clothing

NZ$70

down 13%

Transport

NZ$82

up 10%

Entertainment

NZ$71

up 2%

Healthcare

NZ$62

no change

Pocket money

NZ$35

no change

Communication/ technology

NZ$65

up 1%

Extra and unexpected costs

NZ$60

up 20%

That’s a total of NZ$1,230 per month, or NZ$14,760 a year, or NZ$265,680 from birth to age 18.

46 JUNO |

WINTER 2021

The ‘Stay-at-Home Parent Penalty’ The biggest hidden cost of parenthood is taking time out of the workforce, often for women.

Although it can seem like a money-saver – lower childcare, transport, and clothing costs – in the long term it’s enormously expensive.

Five years out of the workforce, missing out on all the pay rises, career advancements, additional KiwiSaver contributions and returns that entails, can result in the loss of hundreds of thousands of dollars in income.

When you go back into the workforce, you’re usually earning less money than when you left, or working fewer days, and you’ve missed out on opportunities for promotion.

Particularly unfairly, women who don’t have kids are penalised by the expectation that they might, which contributes to the gender pay gap, according to research by www.GlobalWomen.org.nz.

If you’re feeling guilty about enjoying work but netting almost no money from it while your kids are in daycare, you should know that you’re probably making a good longterm investment in your lifetime income.

However, it’s impossible to put a value on spending time with your kids when

they’re young, so you need to weigh that up against your own feelings and financial drivers.

The good news Knowing all the costs, why would anyone have children?

Perhaps surprisingly, there are still some upsides. Parents actually earn more than non-parents in New Zealand, according to the latest research available from Statistics New Zealand.

In other good news, a 2013 Melbourne Institute paper found that children “have a very small impact upon wealth accumulation, seemingly at odds with the large ‘costs’ implied from expenditurebased estimates”.

Children can motivate their parents to save, decrease a parent’s likelihood of quitting their job, and compel parents to plan for the future.

All those actions help to offset the costs of having kids. However, not all the research agrees with this outcome; predictably, wealthier families have better outcomes than lower-income families.

So, if you’re considering having a first child, or adding to your already growing brood, get out your calculator and remember it’s wise to keep the costs in mind – even if the rewards are priceless.

Three reasons to join JUNO

One low fixed monthly fee One low fixed monthly fee determined by the size of your balance. Paying low fees helps grow your KiwiSaver balance, and means there’s more money to benefit from returns.

Active fund management Real humans making investment decisions to help grow and protect your KiwiSaver returns.

You & money Your relationship with money is an important part of being able to reach your financial goals.

Explore our learning library and money personalities to get money-savvy!

Grow your money

Information is current as at May 2021. Pie Funds Management Limited is the issuer and manager of the JUNO KiwiSaver Scheme. View our Product Disclosure Statement at www.junokiwisaver.co.nz. Any advice is given by Pie Funds Management Limited, and is general only. It relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees if you act on any advice. As manager of the Scheme we receive monthly fees that are determined by your balance and whether you are 13 years or over. We will benefit financially if you invest in our products. We manage any conflicts of interest via an internal compliance framework designed to ensure we meet our duties to you. For information about the advice we can provide, our duties and complaint process and how disputes can be resolved, visit www.junokiwisaver.co.nz. All content is correct at time of publication date, unless otherwise indicated. Please let us know if you would like a hard copy of this disclosure information.

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

I Was Lousy at Giving.

How About You? Generosity wasn’t one of comedy writer Dean Watson’s strong points, but he changed. He explains how to form the habit of giving without giving up avocado on toast.

Rick Astley was wrong. Giving it up is even better than 80s music. Even when you earn an average wage, as I do.

I’m 30 years old, so make no mistake, I’m incredibly good-looking. But for a long time, there’s been an ugly side to me. Here it is.

Ready? I’ve been crap at giving. A millennial that’s lousy at giving. Could I be any more clichéd? No. The answer is no.

For a long time, I told myself I didn’t earn enough money to be generous. The 2019-20 tax year was the first year in my life I had annual earnings over NZ$30k, so there’s a little truth to that.

Excuses, excuses, excuses However, knowing what I know now about giving and becoming good at it, I believe that's just

48 JUNO |

WINTER 2021

an excuse. You know, like the 80s were for Rick Astley becoming popular.

I’m now earning just above the median New Zealand wage. And I feel a massive amount of responsibility to put this good fortune to work.

I have a giving goal and it’s this: “To develop a habit of giving when I have a normal amount of money, so that I can make a massive impact with the habit when I have an obscene amount of money.”

I hope my boss is reading this. Hi, Dave!

As a millennial, I was born to be highly sceptical of anything that doesn’t offer instant gratification.

Fortunately, giving = instant gratification.

Giving is the long-lost ‘yin’ to our take-take-take ‘yang’. Giving is the act of restoring balance.

PERSONAL FINANCE

One or more of these will probably fall under the theme of “Giving back”. Imagine you’re 70 years old. Who helped you get to where you are?

Who would you like to thank? Do you really have to wait until you’re 70 to give to that person or cause? Can you start today?

The avocado on toast every Saturday morning is a very important part of the equation. But it’s just one half of the equation.

Plum equals happiness The first time I really started to wake up to the need to give is when I met Sierra, my partner.

I would buy her a plum and she would be so happy.

If you had cut to a scene where I’d just bought her a tropical island and then cut back to the scene where I bought her a plum, her reaction would be pretty much the same. (Note: Data may be flawed as I haven’t tried the island thing yet.)

The point is, seeing the effect that giving something small can have on a person is breath-taking.

Especially when it’s a juicy plum from New World.

1. The first step to forming the habit of giving is to grab a sheet of paper and scribble down some life goals.

2. Next, log onto your internet banking and open a new bank account. Nickname it ‘Give’. Or ‘Plums’.

Choice is yours.

3. Then, choose a set amount to give every week.

I chose NZ$20. Just make sure it’s a sustainable amount to be giving away every week. That way, if you like how giving makes you feel after one week, you can give for a second week, then a third, then a fourth and so on.

4. Finally, set up a weekly auto-payment into this account from the account you get paid into. The amount is what you chose before. So, every week NZ$20 goes into my ‘Give’ account.

From there, I just search out causes or individuals doing cool things that inspire me.

As a comedy writer who knows how tough it is to make a living in that profession, I’ve just been reaching out to people putting on funny local comedy shows who’ve been through especially tough times due to Covid, and giving to them.

WINTER 2021

|

JUNO 49

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

You don’t need to wait until you’re old, rich, and into America’s Cup sailing to have an impact with giving.

50 JUNO |

WINTER 2021

Surprise equals success The grateful and surprised responses I receive have taught me that you don’t need to wait until you’re old, rich, and into America’s Cup sailing to have an impact with giving.

Some people choose to feel close to their overseas family by talking to them on Zoom. I choose to feel close to my family by paying off debts that aren’t even debts.

If you’re struggling to think of who to give to, pay off your Phantom Debts. These are debts that are not really debts, but they haunt you anyway.

Start with $20 Forming the habit of giving is easy and it will make you feel as happy as a plum. Start with NZ$20 and if you like the feeling, do it again the next week.

I’ve vanquished one phantom debt already – paying back my ex for a month of rent from many moons ago.

Do not judge your success at giving based on how much you give. Base it on whether you can form the habit.

I have one more phantom debt to go – paying back my parents the NZ$6.5k they put into my post-school education. Twenty dollars at a time, I’ll get there.

Can you do it every week? For a month? For a year? For five years? For the length of Rick Astley’s career? Maybe not the last one.

PERSONAL FINANCE

From Next Issue

Our Name is Changing This is the last issue that will be called JUNO magazine.

From the next issue we’ll be Informed Investor.

Our new name explains what we do. It tells you that we can help you make informed decisions that could change your life for the better.

Don’t worry, we’ll have the same team, the same experts, the same owners, and the same way of making investing simple. Nothing else changes.

Your magazine will keep coming every quarter.

If you buy us at the supermarket, or pick us up at the Koru Lounge, you’ll have to look out for our new logo. Here’s how it would look on this issue.

The first issue with our new name on it goes on sale at the end of August. Thanks for being a reader and we look forward to continuing our relationship with you as Informed Investor.

If you’re one of our subscribers, you won’t have to do a thing.

What can you build at your place?

Proposed Proposed Duplex House Duplex House 1 2

The Unitary Plan provides great opportunities for many Auckland property owners to generate wealth through property development. From stand-alone homes to multi-unit developments, Ashcroft’s plans are designed to make the very best use of your land.

JUNOHP0121

Discover the development potential of your land with a FREE Site Evaluation Report, register at ashcrofthomes.co.nz

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

Where Did All the Money Go? If you’re earning more but don’t seem to be better off, you could be suffering from ‘lifestyle creep’, says Lynda Moore, the Money Mentalist. She explains what it is.

‘Lifestyle creep’ is where you feel a little bit richer, so your living expenses slowly grow without you even noticing.

Maybe you’ve had a pay rise, maybe you’ve found out that your house is worth more money than it was last year, maybe you have some money invested, or there’s some spare cash left at the end of the month.

Just when we’re feeling comfortable, ‘lifestyle creep’ can sneak up on us and catch us out in one of two ways.

Life’s little pleasures The first is, as our income increases, so does our spending. Part of the reason is we simply have more in our back pocket and if we don’t have a plan, it’s very easy to fritter it away on life’s little pleasures.

Maybe it’s an extra dinner out, here and there. Or a few new clothes in the wardrobe. That weekend away? Or the new car that we didn’t think we could ‘afford’ 52 JUNO |

WINTER 2021

but now can, because the finance company said yes.

I don’t mean to sound cynical, but that’s the reality for many people.

It’s much easier to spend on lifestyle than it is to pay off debts or save for retirement.

Most of us are just wired that way.

The science of spending There’s science behind it. We love the dopamine hit we get when we spend, and the instant gratification – that Freddie Mercury moment of wanting it all, wanting it now, and getting it!

There may be nothing wrong with this. You may be in a financial position where the debt’s gone, you’re sorted for retirement, and you don’t have to worry about lifestyle creep.

Conscious spending Whatever your situation, try to make spending a conscious decision, rather than it just happening.

There might be other areas of life that are more important to you to spend or invest in, and that align to your values. Think about allocating the extra money to those things, rather than seeing it slip away.

If you still have debt or need to top up the retirement fund, then allocate some of the increase to that and enjoy some of it as well.

How much goes where is entirely up to you.

The point here is if you haven’t had the extra cash before, you won’t miss it.

Is there a charity you’d love to support?

Or maybe you want to ‘do’ that something you’ve always wanted to do.

What I don’t want to happen to you is in a year’s time, you look back and wonder where all that extra money went.

Spending creep The second aspect of lifestyle creep is ‘spending creep’. In this scenario, your income hasn’t changed at all, but your lifestyle has.

PERSONAL FINANCE

You might be living a champagne lifestyle on a beer budget. Or you’ve met a new group of friends or started a new relationship, which changes your spending patterns, and you don’t really notice.

Spending creep can also show up when we think we’re doing a good job of keeping spending under control. Things just creep up on us without us really noticing.

Let’s say the car insurance comes up for renewal and it’s just a little bit higher than last year. Or the price of a coffee at your favourite cafe goes up a few cents and you barely notice it.

It’s like a diet!

I had an interesting talk with my personal trainer a while ago that really got me thinking about how easy it is for creep to happen, not only with money, but in other areas as well.

I’m pretty careful how I eat. I know potato chips go straight to my hips, so I watch how many of them I have.

If I indulge in a delicious piece of chocolate cake, I know that I need to do some extra physical activity and ease back a bit on the treats to work it off.

But when my trainer asked for a food diary and we looked over it, I was horrified to see how I’d let portion creep slip into my diet.

I was still eating healthily, but I was eating a little bit more without realising it. No wonder I’d hit a plateau and wasn’t making progress.

Taking your eye off the ball It’s the same with your finances.

You have a plan, everything seems to be going well, so you stop watching.

You grind to a halt and you just aren’t getting any closer to your goals. We can easily identify (and blame) one-off unexpected expenses like a car repair bill or a trip to the dentist, but unless we stop and take check, we can miss the spending creep in other areas.

Whichever type of lifestyle creep is affecting you right now, the way to fix it is the same.

•

Go back and look at your numbers.

•

Keep a money diary for a couple of weeks. Write everything down and see exactly what you’re spending, and what little habits have crept up on you that you can easily nip in the bud.

•

Look again at your goals for the year: are you on track? Do you need to tweak them, or change them completely?

Lifestyle creep is telling you it’s time to take a step back, monitor your spending, review your money plan, revise it, and get back on track.

To assess your spending personality, find out more on www.moneymentalist.com WINTER 2021

|

JUNO 53

Last Chance!

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

Never miss an issue!

Informed Investor (formerly JUNO) magazine is a New Zealand luxury investment and lifestyle magazine which explains in plain English your financial options and how to build wealth.

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

Subscribe now and get a year (4 issues) of this premium magazine for you or a friend for just $20, a saving of $19.80. Or subscribe for two years and get eight issues for just $40.

Email subscriptions@ovato.co.nz Or phone 0508 MAGS4U 0508 624 748 Terms & Conditions 1. All prices for magazine subscriptions include free New Zealand delivery. 2. Please allow up to 10-13 weeks for your first delivery. 3. Your subscription will begin with the next available issue in late August 2021, and in most cases your magazine will be in your hands before it goes on sale in the shops. 4. JUNO Magazine is published by Opes Media Limited, which handles delivery and stipulates the lead time shown above. 5. Offer expires on 20 July 2021. 6. Offer available to New Zealand postal addresses only.

WINTER 2021

|

JUNO 55

$ $

$

$ www.partnerslife.co.nz

ADVERTORIAL

Insurance: Is Your Life Worth a Million Dollars?

Is your life worth a million dollars? Perhaps not. Even if you think it is, can you afford that level of cover? Naomi Ballantyne talks about common insurance mistakes.

With life and health insurance, some people pay too little to get what they expect. Some pay too much for more than they need. Still others buy the wrong kind of policy altogether.

I’m not suggesting that you shouldn’t spend any money at all on life and health insurances. I believe they’re essential to living a secure life, because they protect us from the risk of losing our jobs, our health, or our retirement dreams.

But many of us are getting the wrong level of insurance for our needs.

There’s a quick way to work out if you have the wrong level of cover. Just talk with an adviser about the type of cover you need, and how much of it is right for you.

Advisers don’t cost anything, and you can soon make sure that you’re spending the right amount and not wasting your money.

You can also avoid stress at claims time, and you might even save a bit of money.

Here are the biggest mistakes I see people making.

Spending too much You can end up paying for more insurance than you need.

Is your life worth a million dollars? Or can you and your family get by with a lot less cover if the worst happens?

Did you check online to see how much a million-dollar policy costs and then find yourself walking away because it was too expensive? You might not need that much cover. An adviser can work out what your needs really are.

And the last thing you want to be told is that you could’ve been saving money all these years if you hadn’t been overpaying for your insurance policy.

You may have been buying benefits that you could easily manage without, or benefits that you might not ever be able to claim.

Not spending enough The opposite can sometimes be the case.

We see people not buying what they need in insurance cover – effectively not spending enough on their policy.

When bad things happen, they could end up not being covered enough, or not being covered at all – leading to financial strain.

In the worst case, they may have to use their own money or sell assets to make up the difference between what they were covered for and what they needed.

We’ve seen people come to a standstill in their life with no room to move forward, especially if their money’s running out.

It’s a waste of their money to pay for a policy that isn’t fully covering them for what they need, leaving them exposed to huge costs when bad things happen.

Buying the wrong type of cover Sometimes people find that the insurance they’ve been paying for over the years doesn’t cover the health events that these days cause the biggest interruptions to people’s finances.

Yet they might still be covered for other health events that are a lot less likely to happen, or that would have less of an impact if they did.

How not to waste money on insurance The most common reason why people end up wasting money on their life and health insurances is that they didn’t get the right (or any) advice.

Maybe they didn’t go to an adviser to get

the right cover for their individual needs.

Seeing an adviser doesn’t cost anything and only takes up a small amount of your time – but it can make a huge difference to your financial outcome.

And many people don’t realise they should get their policies reviewed every year or two to take in any changes in their lives.

Sometimes these reviews don’t happen because life gets in the way and the adviser and client never get around to talking about the changes. But it is important to get your cover reviewed at all the important life stages.

This means that when you need to, you can successfully make a claim on your cover to lighten the burden that medical or financial issues might create.

I don’t know what’s worse, not paying enough for your insurance policy and not getting the right cover, overspending on insurance you don’t need or can’t use, or not being covered for the benefits you need, especially when you thought you’d been paying for the right cover.

Ask an expert The simplest way to get a new policy or update an existing one is to ask an expert, so you fully understand how insurance could help you in your current circumstances.

An adviser can check how appropriate your existing policies are at matching your current insurance needs. They can make changes to or suggest products to close any gaps.

Then, if you ever need to claim on your insurance, they’ll be on hand to help you get the most out of it, so you have a positive, stress-free experience.

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

58 JUNO |

WINTER 2021

Freedom to enjoy your retirement

PERSONAL FINANCE

Make Life Easy When you Retire You might hope to become a millionaire, or close to it. But when you stop work, how do you turn a house, NZ Super, and a bunch of shares into a good lifestyle? Brenda Ward asks the experts.

Heartland is New Zealand’s leading reverse mortgage provider. A reverse mortgage is similar to a normal home spending, say, NZ$80,000, in retirement Maybe you dream of giving up work process. It’s simply about using the capital that drop to about NZ$68,000. in a deckchair with abeen cocktail in designed that you’ve accumulated to fund needs the loanto sitthat has for the ofmightpeople aged hand. You’ll be carefree because in the retirement that you were hoping for.”

Hepple says he’s found that for a couple background, your living costs are paid by 60 and over. going into retirement, NZ$60,000How much will I need? investment returns from your nest-egg.

NZ$70,000 a year is about the average The best way to work out how much you for people to live off. That’s NZ$1,153need to live on in retirement is to look at NZ$1,346 a week. how you live now and how others live, says SinceHaving 2004, Heartland Reverse Mortgages have helped over 18,000 Kiwis enjoy more a lump sum invested that earns Matthews.

“Some need as high as a quarter of a money to fund your lifestyle of the future freedom retirement.

Mortgage can be used for a number of purposes million, and some are able to live off the is why in you’re investing, right?A Reverse “That’s why we produced the Massey smell of an oily rag.”

Retirement family, Expendituremedical Guidelines, and to including home improvements, assisting healthcare, purchasing a But wealth adviser Simon Hepple of Pie work out what Kiwi retirees are actually Funds says with today’s interest rates How do I get the nest-egg? spending.” new car, daymarkets, to day living expenses or unexpected costs. and volatile if you’re just relying Save: If you’re a committed saver and The guidelines can be found online at on an income from the returns on your live a frugal life, you could build up a nestMassey.ac.nz. There you can see roughly investments, you’re going to be in for a egg from the money you’ve put aside all what the average including: retiree spends, in the city shock.

Enjoyrude considerable flexibility and protection your working life. But that’s the slow way or the provinces. to earn it.

So, tomorrow’s retirees are going to have If you’re a Kiwi you’re going to get NZ • Maintain ownership of creative your home to crack into that nest-egg – or get Shares, bonds, fixed interest, managed Super, which is currently NZ$34,955 a year when they decumulate, say the experts. funds, KiwiSaver: We call these things for couples or single NZ$22,721 a year. ‘the financial markets’. Massey University • Flexible drawdown options Those rates are after tax at tax code M. What is decumulating? researcher Sandra Xu calls this ‘the engine Well, decumulating is just the opposite of Here’s the bad news. For most people, that to drive an individual’s net wealth’. She’s ‘accumulating’, Associate Professor • No regular says payments requiredwon’t be enough money to live on. working on research showing retirees who Claire Matthews of Massey University. It’s invest in the financial markets boost their spending instead ofequity saving. guarantee “Then you say, well, what kind of • No negative financial wellbeing through a 24 per cent retirement do I really want? What are the increase in their annualised net wealth.

“Throughout your working life, you things I need to spend money on? What is accumulate funds into your retirement it going to cost me? And then this leads to Buy a house and pay it off: Keep living savingsinformation and build up a balance which will how much will I need?” or call our friendly dedicated For more visit costs down by havingteam no rent or mortgage. be available to you,” she says.

Your home might go up in value, and you Hepple says he finds most people spend . today on might be able to downsize to a smaller “Then during retirement, you use up about 15 to 20 per cent less retired than home and pocket the difference. they do working. If you’re currently that balance, which is the ‘decumulation’ But it might not be that easy.

0800 488 740

heartland.co.nz

Heartland Bank Limited’s lending criteria, fees and charges apply.

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

Buy a rental property (or two): Same deal – the value goes up and you can sell it. Or even better, you can use the rental returns as an income when you retire.

Get a reverse mortgage: If you own your home and are older than 60, you could release some cash from it using a reverse mortgage.

Forests, property syndicates, horticulture or farm schemes: You can join others in investment pools that give you a return regularly or as a one-off at harvest time.

Buying a business: You win several ways – by buying yourself an income, being your own boss and then selling it when you retire.

Just keep on working: You could do this part-time or fulltime, while your nest-egg keeps earning for you.

Get it all together One of the first problems Hepple says he strikes when he’s advising a client is getting their assets together.

“One of the big problems that I’ve come across with investors is that they have 60 JUNO |

WINTER 2021

assets scattered all over the place – and sometimes, the world. They don’t know for the life of them where everything is.

“There could be shares they got from issues a long while ago or some pensions they may have from abroad. It makes absolutely no sense keeping assets overseas with a pension provider when you can bring it back to New Zealand.”

Cracking that nest-egg Many people would love to live off their investment earnings alone and leave their nest-egg intact, but these days it’s just not feasible, say the experts.

Hepple says: “I’m now actively encouraging clients to start eating into their capital because there’s nothing worse than having a million-dollar portfolio and just wanting to keep your million dollars intact by trying to be frugal.

“You’re better off to start drawing down your capital and using it in retirement. No one knows how long they’re going to live, but it wouldn’t be the end of the world to be using, say, NZ$20,000 or NZ$30,000 a year from income, and then maybe taking

NZ$20,000 to NZ$30,000 a year in capital.

“That would still last quite a long time.”

Matthews says the concept of decumulation assumes that you’re going to consume your capital over your retirement.

“The only reason not to decumulate is because you want to leave an inheritance or donate to your favourite charity.

“If you don’t have that goal, then yes, you should be consuming your capital – because you can’t use it when you’re gone.”

What about the future?

Matthews says Kiwi retirees seem to be doing OK. “I’m a little cautious because we’re talking of Baby Boomers and older, and we’re starting to see changes as time progresses and as we get into a different generation.

“Most Baby Boomers own their own homes, generally without a mortgage, but there are lower levels of home ownership in the coming generations.

“This will influence what people’s retirement looks like.”

Freedom to enjoy your retirement Heartland is New Zealand’s leading reverse mortgage provider. A reverse mortgage is similar to a normal home loan that has been designed for the needs of people aged 60 and over.

Since 2004, Heartland Reverse Mortgages have helped over 18,000 Kiwis enjoy more freedom in retirement. A Reverse Mortgage can be used for a number of purposes including home improvements, assisting family, medical and healthcare, purchasing a new car, day to day living expenses or unexpected costs.

Enjoy considerable flexibility and protection including: • Maintain ownership of your home • Flexible drawdown options • No regular payments required • No negative equity guarantee For more information visit heartland.co.nz or call our friendly dedicated team today on 0800 488 740.

Heartland Bank Limited’s lending criteria, fees and charges apply.

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

Stop Buying Lotto and Hit the Jackpot Winning Lotto can make you an instant millionaire, but how much richer would you be if you didn’t buy tickets? Diana Clement looks at the odds and the alternatives.

Most Kiwis don’t realise how much money they throw away on their magic numbers – or that this money could make them rich anyway.

If you think you’re going to win Lotto in New Zealand, don’t bank on it. Your chances per line of winning Powerball are just 1 in 38,383,800.

But you could be a winner, even without getting the right numbers.

Let’s take a look at how you could get rich.

Option 1: Don’t buy the ticket.

Let’s say every week you buy the cheapest Lotto Triple Dip ticket at NZ$16.

Stop buying them and over a year you’ve saved NZ$832, without any investment growth.

Over two years, you’d have $1664, which would add up to enough when borders open for a short family break to the Gold Coast, the Pacific Islands, or a very nice jaunt to Rotorua.

Call it a Lotto break, and the experience could provide children with a very good lesson in how to manage money.

Option 2: Join KiwiSaver. Watch it grow.

If you’re not already in KiwiSaver, start an account and put in that money instead of buying a ticket each week.

You’ll get a 50 per cent instant return from the government contribution.

62 JUNO |

WINTER 2021

You then have NZ$832 + NZ$416, which equals NZ$1248 for the year. Year after year, that soon adds up.

Let’s add some investment growth to that.

Voluntary contributions of NZ$16 a week over 40 years means you could have NZ$193,925.57 in your KiwiSaver account when you retired at 65.

To work that out, we used the KiwiSaver calculator at Calculate.co.nz. It assumes that you’ve invested your money in a growth fund, are on a low income so you’re only paying 17.5 per cent prescribed investor rate (PIR) tax, the account management fee is 0.40 per cent, and inflation is running at 3 per cent a year.

Option 3: Already in KiwiSaver? Add voluntary contributions.

If you’re on a NZ$70,000 salary, already investing and getting employer contributions and the government contribution, adding your NZ$16 a week as a voluntary contribution could take your returns at retirement from NZ$587,178.64 to NZ$684,655.99.

Option 4: Use it towards your first home.

There’s more. If along the way you withdraw some of your KiwiSaver money to buy your first home, you’ll get capital gains on the house too – and we all know how crazy house prices have gone.

The moral of the tale is that NZ$16 a week can make you wealthy if you invest it wisely.

It shows the power of small sums invested regularly.

Option 5: Pay off debt.

Sadly, people often spend money on Lotto that they don’t have.

You could be nearly a hundred thousand dollars better off.

If you can’t afford to add the money to your KiwiSaver, you should at least direct it to paying off debt. That will save you a lot in interest over the years.

That’s worked out with a PIR rate of 28 per cent, inflation at 3 per cent and salary rises of 2 per cent a year.

Option 6: Have a flutter – and still have the cash.

In the meantime, if you wanted a small

PERSONAL FINANCE

flutter without spending the NZ$16 on gambling, you could save it into a prize saver account.

Admittedly, the interest on these accounts isn’t great. Co-operative Bank’s Prize Draw Saver, for example, pays only 0.10 per cent interest, but you’re in the draw to win a Mini Cooper car each month. And even if you don’t win, you’ll still have your NZ$16.

TSB offers a single prize of NZ$25,000 a month if you have more than NZ$1,000 in your Premier or WebSaver account.

ASB Bank’s PrizeSaver account gives away 10 prizes of NZ$1,000 each month. It’s not quite Bonus Bonds (which are no more), but you do have a chance to win.

Do you really want to win Lotto?

Becoming a winner can be complicated. For some people, winning Lotto can be a curse.

Many Lotto winners burn through the entire lot and end up poor again. You don’t

have to search hard to find stories of such Lotto winners.

UK winner Mickey Carroll won £9.7 million at the age of 19 in 2002. According to The Mirror newspaper he wasted millions on cocaine, gambling, and prostitutes, and ended up as a factory worker living from pay day to pay day.

New Zealand’s own 26 million-dollar-man, Trevor Cooper, a former supermarket worker, is said to have blown much of his money on cars, houses, and more.

Finally, if you do win, you need to be very sensible with your windfall.

What to do if you do win Lotto New Zealand puts winners in touch with experienced staff at their bank to get advice.

Neville Giles, a senior private banker at ANZ Private is one of those advisers who meets regularly with Lotto winners.

He says it’s a great part of his job.

The first thing he tells winners is to keep the circle of who they tell small, to avoid people trying to get money out of you.

Then, don’t do anything rash, like quitting your job or buying a bach and a high-end boat. Sometimes people don’t realise the ongoing costs of those expensive toys.

“If you’re going to treat yourself to something, just buy bubbles for a hundred bucks,” says Giles.

“Don’t buy anything more expensive until you’ve had time to think about it.”

Put the money into a three-month deposit account while you make a plan, he says.

Yes, you could buy everything you want now, but by investing the money, you’ll be setting yourself up for a lifetime of higher earning, says Giles.

WINTER 2021

|

JUNO 63

Call for entries Awards categories Calling all clear communicators!

Share your plain language stories.

Get the recognition you deserve for your outstanding efforts in plain language.

Entries close: 31 July Winners announced: 14 October Questions? enquiries@plainenglishawards.org.nz

Enter at: plainenglishawards.org.nz

Plain English Champion • Best Organisation • Best Individual or Team Best Plain English Document • Public Sector • Private Sector Best Plain English Website • Public Sector • Private Sector Best Plain English Sentence Transformation Best Plain English Annual Report Best Plain English Legal Document Best Plain English Technical Communicator Best Plain English Turnaround People’s Choice • Best Plain English Communication • Worst Brainstrain Communication

plainenglishawards.org.nz

ADVERTORIAL

Sold! The Allure of The Auction A diamond ring, an artwork, a vintage Rolex, or a classic car – savvy connoisseurs are crowding into auction rooms to get the trappings of wealth for less, say the experts at Webb’s Auctions.

There’s been a boom in auctions as more and more Kiwis want to buy the good things in life, while others are trying to cash in valuable items, says the team at Webb’s.

Ben Erren, the youthful Head of Decorative Arts, says the auction house is seeing more young buyers than ever before.

The market’s changing, he says.

“They’re like me and my colleagues. If you can’t afford to spend an enormous amount of money but you like nice things, you can still have them,” he says.

His equally youthful colleague Charles Ninow, Head of Art, agrees. “Auctions are a fantastic way to acquire quite lovely pieces at a reasonable price.”

Ninow is an expert in the sale and valuation of New Zealand art and one of the country’s foremost art auctioneers.

He says in general the valuations that come with items at auction are substantially less than you’d have to pay if you went into a retail store, especially with estate jewellery or vintage watches.

“You can come in and buy a Baume and Mercier watch, a really beautiful vintage Patek Philippe or a Cartier or a Rolex for far, far less than you would have to from a highstreet jeweller.

“And the beauty of it is, the longer you wear a watch like that, the more it grows in worth.”

And if you want a diamond ring, you can probably get a bigger diamond than you could afford at retail.

“Why not have one that makes people go ‘woah’?”

Ninow says the growing demand for auctions has forced the company started by Peter Webb in 1976 to move into larger and larger premises.

www.webbs.co.nz

As senior people retired, says Ninow, it created a lot of opportunity for younger people to do amazing things.

“I think it’s part of the energy. Webb’s is an amazing New Zealand institution – also the market’s fantastic at the moment.”

Auctions are fun There are several things driving the popularity of auctions. One is, it’s fun, says Ninow.

“Webb’s uses social media and videos.

We have DJs at our openings, oysters, champagne. Because people don’t realise that it is tremendous fun.”

Adds Erren: “When you sell, you meet with somebody like Charles or myself who knows a lot about the product, we really engage with them and we may have a story or narrative to go along with it.”

Another factor was the lockdowns.

Says Ninow: “We all spent so much time at home during lockdown and people looked around and thought, what can I do to make my home space more comfortable for me, somewhere that I actually want to spend time in.”

And the lack of travel has meant Kiwis have more money to spend.

“People aren’t going on overseas holidays.

We did an auction recently in Queenstown and it was full, the whole place was full. It was like an auction in Silicon Valley. We did a million-dollar sale there.”

Erren says it’s not just trendy mid-century modern furniture that sells. “There are wonderful pieces of glass art that younger people are engaging with, especially New Zealand design of the 30s, 40s, 50s and 60s, that have been underappreciated.

“You can pick up these pieces at reasonably modest prices at auction and have something that’s a really beautiful part of New Zealand history and really relevant to today’s lifestyles.”

Why are there so many sellers?

Says Erren: “With the market so strong a lot of people see it as the right time to sell.

You’re going to get nothing in the bank for it.”

Ninow says he believes the pandemic has changed the world’s perception of value, investment, and money. “But there’s something about a painting that’s real. It’s yours. Nobody needs to know you have it if they don’t need to know, and you can hold it and you can move it around.”

He says the sellers that auction houses love most are people who’ve owned artworks that haven’t seen the light of day for a long time.

“I get very excited about those. I answer and return every single phone call because it could be the next amazing thing.

“When it is, it’s like the most amazing feeling.

It’s like lightning striking right beside you. It’s the touch of God.” For more information on buying at selling at auction, visit webbs.co.nz

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

Is the Vaccine a Shot in the Arm? Mass vaccination is in full swing in many countries. What impact will it have on global markets? Pie Funds CEO and founder Mike Taylor explains.

The Covid-19 pandemic has hugely changed the business – and the investing – landscape.

Some sectors have barely survived, while others have thrived. And entirely new sectors have emerged completely.

Places like the UK and the US are now well into their vaccination roll-out, with many other countries following. Mass vaccination, and herd immunity through it, means borders will slowly open and global economies will reopen.

The business sector will change yet again when people are able to get out and about more.

The new recovery phase In the first phase of the pandemic there was a surge in demand for goods, particularly products that would help people work and live extensively from home more easily.

That meant a boom in things like mealkit delivery, digital tools like Zoom, office set-ups, and leisure items like new pets and bikes.

We often call these companies ‘Covid beneficiaries’. Some of these will still be in demand for a long time because our habits have changed.

For example, many people have now added cycling into their everyday routine, or perhaps still work from home a few days a week using digital tools.

66 JUNO |

WINTER 2021

Vaccination will usher in a recovery phase and this will release pent-up demand for services and leisure.

their portfolios to invest in sectors and companies they think will benefit from the reopening trade.

Don’t forget that many countries are still in and out of strict lockdowns, and some shops have been closed for a long time.

We should see things like shipping delays and the ease of imports and exports improve, too.

Who will benefit?

What sectors will benefit from mass vaccination? I’d suggest things like travel, entertainment, restaurants, and activities where people interact socially in groups will benefit most.

The global economy will pick up It’s still unclear how much of a boom the global economy will see, but economists estimate that 2021 and 2022 should be the biggest years for growth since the Global Financial Crisis (GFC) of 2007-08.

If they’ve survived until now, they’re expected to thrive. Many investors expected this move and have already transitioned

Also, central banks are mindful that the recovery from the GFC took over a decade.

PERSONAL FINANCE

New Zealand is seen as a haven to many, so I think travel to our country will boom once borders open and travellers are vaccinated.

This time, they’re focused on providing enough stimulus (think cash injections) to ensure that economies get back to full employment and that inflation can pick up from very low levels.

Spotlight on wealth So far, wealthier countries have been in a better position to buy vaccines than poorer ones, and this may have an impact on markets.

But the 2009 swine flu epidemic in Asia, which affected many poorer countries, didn’t slow countries’ economic growth rates.

suggest that once they’re vaccinated, people will feel safe to travel overseas.

give us a good idea how people feel about travelling abroad.

The travel and leisure sector isn’t dead. I’d expect the trends before Covid will recover gradually over the next two or three years.

I’d expect our borders to reopen once we’ve reached herd immunity from vaccinations, which is estimated to be the end of this year.

As well, there’s the global ‘Covax’ scheme, which hopes to make sure vaccines are shared fairly across all nations.

New Zealand is seen as a haven to many, so I think travel to our country will boom once borders open and travellers are vaccinated.

And we’re helping here in New Zealand too, providing for our neighbouring islands, like the Cook Islands.

Likewise, many Kiwis will likely be excited to go overseas to visit family and friends, for business and leisure.

Right now, I still think that the first opening will be restricted to countries that are either within our bubble at the time, or to travellers who have proof of vaccination at departure.

What about travel and tourism?

Which brings us to travel. Many surveys

Our new bubble with Australia is a great start, and over the next few months it’ll

So, I expect that lower vaccination rates in some poorer countries won’t hamper the global recovery this time.

Mike Taylor is the CEO and Founder of Pie Funds.

You can view Pie Funds’ disclosure documents on the Pie Funds website. For personalised financial advice, please speak to a financial adviser. Correct as of 19 April 2021.

Looking to earn better interest?

6.5 p.a.

%+

Fixed term investment opportunities* offering returns from 6.5% p.a. secured by registered 1st mortgage.

visit rocketfinance.co.nz

*This opportunity is only available to select wholesale investors.

Spenders

TIPS FOR

Avoiders

Worriers

Risk-takers Savers

Are you a spender or a saver?

Understanding your relationship with money is an important part of being able to reach your financial goals.

Take our fun quiz to discover your money personality type, and unlock helpful tips to get money-savvy!

Visit junokiwisaver.co.nz to discover your money personality

Grow your money

Information is current as at May 2021. Pie Funds Management Limited is the issuer and manager of the JUNO KiwiSaver Scheme. View our Product Disclosure Statement at www.junokiwisaver.co.nz.

Any advice is given by Pie Funds Management Limited, and is general only. It relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees if you act on any advice. As manager of the Scheme we receive monthly fees that are determined by your balance and whether you are 13 years or over. We will benefit financially if you invest in our products. We manage any conflicts of interest via an internal compliance framework designed to ensure we meet our duties to you. For information about the advice we can provide, our duties and complaint process and how disputes can be resolved, visit www.junokiwisaver.co.nz. All content is correct at time of publication date, unless otherwise indicated. Please let us know if you would like a hard copy of this disclosure information.

PERSONAL FINANCE

‘I lived frugally, trying to exist on NZ$15,000 a year’ Journalist Richard Meadows took a leap into the unknown, travelling the world for less and living off his investments.

Sometimes, the right idea at the right time can change your whole life. That’s what happened to Richard Meadows at 22.

He enjoyed his job as a financial journalist, but had a negative net worth, itchy feet, and a nagging sense there must be more to life.

He read about the FIRE movement - Financial Independence, Retire Early. The principles of frugal living and financial freedom immediately resonated with him.

“I think it was the prospect of being able to make small lifestyle changes and have a large outcome,” he says, “chipping away at earning my freedom, taking back the power so my autonomy doesn’t rest on anyone else.”

Living on NZ$15,000 a year Meadows began aggressively cutting his spending and rapidly improved his net worth.

Three years later it had reached just under NZ$100,000, and he decided to take a massive leap into the unknown.

He quit his job and headed overseas, staying in places like Chiang Mai in Thailand and Mexico City, aiming to live on just NZ$15,000 a year.

Some of his expenses would be funded by his freelance writing; he assumed he’d gradually run through his invested money.

To his surprise, though, Meadows soon found his bare-bones lifestyle meant he wasn’t eating away at his funds.

Instead, he was living well below his income and squirrelling away a significant amount of cash into investments.

His most reliable performer over the years has been passive mutual funds, though he’s also dabbled in riskier equities for fun.

He searches for investments with limited downsides and large upsides, which he writes about on his blog The Deep Dish and in his book Optionality.

He never quite managed to keep his spending under his goal, but he usually came within just a few hundred dollars – all tracked meticulously on a spreadsheet.

Back home with a new perspective There have been plenty of non-financial benefits to his experiences, too. He says he’s more open-minded and resilient, which he thinks is one of the biggest upsides of the great Kiwi OE.

His possessions were limited to what fitted in his seven-kilogram backpack, and he managed five years and 10 countries with just two pairs each of underpants, shoes, and socks.

“Going towards ambiguity and mildly stressful situations often has a low cost, or no cost, but exposes to you to possibilities.

Meeting people, travelling, taking every

shot – I doubt anyone would regret spending their twenties doing that.”

In November 2020, at 30, he came home, after sitting out the pandemic in Mexico.

There’s no way he could live on such a tight budget here, but the lessons he learned will definitely stick. “I think extremely carefully about possessions, in particular. I’m really intentional about what I bring into my life.

“I’m happy to spend a lot of money on something if I’ve thought hard about the utility and joy it will bring me, but I will be keeping the frugal ethos of not mindlessly acquiring things.”

His absolute commitment to frugal living has paid off handsomely. Many of his investments have performed well, leaving his net worth healthier than it’s ever been.

He’s bought his first home in Auckland, “something I never intended or thought I would do, and it’s a very big commitment”.

He plans to write a little and manage his investments.“But I’m sure I’ll get itchy feet at some point.”

WINTER 2021

|

JUNO 69

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

‘I’ve just sold the second business I started from scratch’ Neil Thomas sees solutions to problems – and turns them into successful businesses.

Auckland man Neil Thomas saw an opportunity when the America’s Cup was on in 2000. He started The Produce Company to meet a need.

“All those years ago you could only buy crates of produce at the markets, but when the America’s Cup came to Auckland, all the restaurants around the Viaduct were saying they wanted a delivery seven days a week.

“So, we said, OK let’s give it a go. Let’s get up at blimmin’ two in the morning and go to the markets, let’s get some staff and get some vans out there and do some delivering.

“It was just an idea around how to fix a problem.

Problem-solving is usually how a business starts, so we solved the problem and created a business that way.”

and get organic produce out to people in their households.”

he moved into a bigger store close to the Albany Plaza.

But after building the business up, Thomas found the relentless 24-hour operation too tough for family life.

So, he just got on the phone and started setting up suppliers for a business of his own, Naturally Organics.

He had great customer and supplier loyalty, so he wanted to sell The Produce Company to an owner who would grow it. And he did.

New business starts This new business was an immediate success. “But we were running it from a warehouse and running boxes everywhere.

There was a lot of manual work, more than I expected.”

“We worked out customers want a nice environment where they can get nice food at an okay price, so people can easily get their organic veges for a healthy lifestyle.

“The guys who are doing the Produce Company now have definitely taken it to the next level, in fact, they’re international.”

Vege box brainstorm Then Thomas went to a friend’s house for dinner and saw a box of vegetables on their kitchen bench. “I looked inside it and asked what it was.”

Just when a disheartened Thomas was about to close the business down, a local man walked through the warehouse door and offered him a store space.

The friend explained he had organic vegetables delivered.

He agreed to buy the building and set up a Naturally Organics retail store. “Once we opened the doors in retail our business just went crazy.

“I pulled out the docket and I said: “Jeepers, these guys are making too much money. I thought this is a lifestyle business. I think I can do this over five days, and I can make it viable

“We were able to run the online side and have a retail operation. From two staff we went to 12. We developed so much we got too big for that retail store.” Eight years ago,

70 JUNO |

WINTER 2021

As a Baby Boomer, last year Thomas was starting to think about selling the business. It seemed like a good time, so he approached ABC Business Sales.

“The business is going really, really well and it’s probably time for the business to take a leap up to another level.”

Following a successful sales process through sales specialists Lester de Vere and Richard Stevens, its new owners want to do just that, and they’re well placed to do it.

“We thought, we can pass this to somebody who’s going to look after the baby.”

Thomas is helping the business transition, then wants to work as a consultant to help other businesses solve problems.

‘We want to spend more time with our kids’ Christine and Dion Manson want to be free to work only part-time using rental properties.

“Growing up as a Kiwi Chinese in New Zealand, my parents were already investing, so that’s something we talked about at home,” says Christine Manson.

The Air New Zealand flight attendant says when she met her future husband, Dion, a vehicle consultant, they talked about what was important to them.

“The question was, what is the long-term vision for us?” she says. “Do we want to be stuck in the rat race for the rest of our lives, paying more tax, and missing out on things that matter?

“Or should we do something that will generate income for us to the point that we could go part-time?”

In 2015, before the pair married, Dion bought his first house, in Christchurch, and they lived in it.

Then in 2018, they thought of buying a second house and making the first a rental property.

And just like that, the perfect house popped up.

“I’d said to Dion: ‘All I want is a house with a big back yard for the dog to run around in.’ He found it.”

Says Dion: “This house had been on the market for quite a while. The husband had bought it as an investment property, and he had had been doing it up, but he passed away.”

The pair bought it for less than the capital value (CV), but they knew it would be a hard slog to renovate it.

Says Dion: “Properties were going up so much that we knew the only way we could buy another house in Christchurch was to buy something that needed work and do it up.”

They had the support of Christine’s family and advice from her dad, a carpenter.

Another complication was that the pair bought the house while they were travelling in Europe, using FaceTime for the lawyer and hotel scanners and printers.

Once the house was theirs, the pair rolled up their sleeves.

They kept up their fulltime jobs and renovated on their days off and until 10pm after work, sanding and painting.

Says Dion: “We’d always wanted to invest again, using the equity from the houses.

“We went on a property course and looked New Zealand-wide at returns.”

They liked Invercargill. “We looked at so many houses and put in so many offers.

Every day, another offer.

“We saw a place there and got an offer accepted subject to a valuation of the property. We could have bought it, but that meant there'd have been no money to renovate, so we had to pull the pin.”

They tried again at the end of 2019 and had pre-approval to buy in Invercargill. Then Covid happened. Because Christine works for an airline, the couple faced strict rules and spent months trying to get a mortgage.

“I got so frustrated! I could see the house working financially. I got so hacked off that the bank was saying, ‘Not good enough’.”

But he had a goal and was determined.

The pair got their house revalued, and a second mortgage broker pushed it through.

They settled on the house in Invercargill in September and Christine still has her job.

They’re finishing their own renovation in Christchurch and professionals are doing up the Invercargill house.

The best part? The demo, says Christine: “I’m the queen of demo!”

The hard work’s been worth it, says Dion.

“The thing we keep reminding ourselves is why we’re doing it. We wanted to make sure that when our kids come, we’re both working at least part-time. We want to watch our kids grow up and be with them.”

WINTER 2021

|

JUNO 71

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

‘We wanted a passive income when we retired’ These retired teachers cashed in their rental properties for a commercial property investment so they could relax and reap the rewards.

Donna and Sam Opie worked as school teachers until they retired, a satisfying and rewarding career, but one not known for high salaries.

“You’re never going to line your pockets with gold, being school teachers,” laughs Sam. “So, we knew very early on that we needed to work at creating wealth ourselves with passive investments. The idea was that we’d have passive investments equal to our salaries when we retire.

“We’ve achieved that, but we’ve had to do it through buying old investment properties.

“Now they’re getting older – more work.

And I’m getting older – less work, so we’ve cashed in those older residential properties, and we’ve put that money into PMG.” Property funds The pair say they like that PMG is one of New Zealand’s most established property funds managers.

In property funds, multiple investors buy units or shares in a fund that is diversified across a number of properties throughout New Zealand, with many tenants, in a variety of sectors.

They’ve long been fans of PMG’s founder, Denis McMahon, after meeting him at an event when they were members of the Tauranga Property Investors Association.

“It was going back in the early days when he was syndicating,” recalls Sam. “Syndication didn’t appeal to us at the time. It’s just one building with a whole lot of owners, but I was intrigued by his integrity, so from that point we sort of followed him and watched how he’s proved himself over the years.”

72 JUNO |

WINTER 2021

When McMahon and the PMG team started selling shares in property funds, the pair decided to invest. They like the regular and reliable income, says Donna.

“It allows us to plan ahead, financially and within our life, and know that money’s going to be there.

“We’ve had rentals for a very long time, so that income can be up and down, whereas we know the money from PMG will be coming in each quarter.”

No work involved Sam agrees. “I like the fact that there’s no work involved and that the returns are reliable.

Donna says she likes that PMG is transparent. “What they present is what you get. They’re very good at having regular meetings and explaining everything so that people can understand.

“I feel that at any time I can phone or email and nothing’s too much trouble.”

Start early The pair say they’re pleased they took steps early on to build wealth, and Donna urges young people to start investing early.

“When COVID came around, I thought, ‘This’ll be interesting!’ But there was no change.”

“The great thing about the PMG Generation Fund is that you can invest a small amount. I’d say to young people, it’s actually never too soon to invest a small amount, if it’s $1000, or $5000. It has a way of growing.

The PMG team explained to clients what they were doing about it, and what they hoped to achieve, says Sam, so the pair stayed put.

“I’d like to see more young people think about that. In life you can spend some money – but you also need to save some money.”

The Tiger is Rising After investors learn to trade on beginner trading platforms, many are moving into more complex investment products, says Tiger Brokers.

A growing number of Kiwis are moving on from simple share transactions, into the exciting world of margin, options, or futures trading accounts, says Albert Flint, head of Business Development at Tiger Brokers.

“Many retail brokers, like Sharesies, focus on a limited low-risk offering for everyday investors and they’re a great place to start, but such an offering can only go so far,” he says.

“When you’ve learnt all about vanilla securities and you want to see what else is out there, we can give you a wider range of products at a super-competitive price.”

This includes investing directly in over-thecounter (OTC) or derivative products.

Flint says Tiger Brokers is a purely online broker that offers Kiwis a cost-effective platform for entry-level and experienced investors alike.

There are many benefits of the platform, says Flint.

“We have more choices, with lower fees, making it a compelling proposition for sophisticated retail investors.

“If you want to trade in markets that other

www.tigerbrokers.nz

platforms don’t reach, like China, Hong Kong and Singapore, we’re your go-to place.”

means New Zealand clients can get very low-cost brokerage into the five major markets where it operates.

He says among Kiwis, popular products are shares in Australia and the US, margin, options, or futures trading accounts.

“Tiger started in mainland China at a time when traditional banking and fintech services were reinventing themselves,” Flint explains.

They’re an ideal way to get into more complex investment products once you understand them, he says.

“It created a way for Chinese retail investors – both in China and ex-pats overseas – to buy global shares.

Massive buying power

“There are only limited ways to allow capital to flow out of China, so there was strong demand for access to international markets.”

Tiger Brokers currently charges zero brokerage fees for US securities for the lifetime of your account, making it by far the lowest-priced local trading platform.

On Hong Kong and China stocks, the commission is below 0.05 per cent, and it’s below 0.15 per cent for Singapore and Australian stocks. Financing rates on margin accounts start from 3 per cent.

Flint says the low fees are possible because Tiger Brokers in New Zealand is owned by the China-based parent company Tiger Brokers, a publicly listed fintech business with huge global reach.

Leveraging the buying power of the international Tiger Brokers organisation

Tiger Brokers now handles around 70 per cent of the Chinese market for US securities.

Asian opportunities US shares will always be popular and well understood here, but New Zealand’s proximity and strong trading relationship with Asia creates new and interesting opportunities for investment, says Flint.

The Hong Kong Stock Exchange is Asia’s largest exchange by market capitalisation and has performed extremely well over the last year, while

ADVERTORIAL

the Singapore Exchange is known for its tax advantages, stability, and strong dividends.

China has its own selling points: a giant pool of tech expertise, a population of 1.4 billion, and post-Covid first-quarter 2021 economic growth of 18.3 per cent.

Every Kiwi has benefited from trading with China, from the Chinese-made products we buy to the money that’s flowed into our economy, says Flint.

Considering how much we rely on the success of China, Hong Kong, and Singapore, he says we should all think about investing in the future of Asian markets.

“The world has changed in last 20 years.

A lot of the growth is in the East.

“There’s been exponential levels of wealth pouring into Hong Kong and Shenzhen, and systems allow Hong Kong and the mainland to interact and transact, which has led to the huge growth of fintech and the financialisation of those markets.

“This is likely to continue,” he says.

“We’re no longer looking at the ‘$2 Shop’ stereotype of Chinese business – this is

about huge conglomerates with global revenue streams.”

Plans to expand Tiger Brokers New Zealand is a separate unit from its global parent company, and expanding rapidly. For now, retail investors are the main clients for the business, but institutional investors are beginning to take an interest in its market-leading low fees.

Flint says the Tiger team would also like to move into wealth management and investment banking, while continuing to offer more choices than other providers on an easy-to-use platform.

“It used to be painful to be a retail investor in New Zealand – with such small numbers, there’s been a long-standing indifference from our markets,” says Flint.

“Now Kiwis retail investors don’t need to endure the expensive and long-standing barriers to entry to trade from our little corner of the world. When you want to transact globally, and you want to do so on the cheapest price point, think Tiger.”

Editor's note: Derivatives are for experienced investors.

TIGER’S GLOBAL REACH Tiger Brokers listed on the Nasdaq in 2019 (TIGR) and is backed by major investors including Xiaomi, Jim Rogers and the Beijing-based venture capital firm ZhenFund.

It holds brokerage licences in Singapore, the US, New Zealand, and Australia.

US $2.7 billion market cap value

US $219 billion

in total trading volume during 2020

188.1 per cent

growth in trading volume year-on-year, to January 2021

1 million+

worldwide customers

1.47 million

products available on its trading app

www.tigerbrokers.nz

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

A Richer You, Using KiwiSaver We can all learn from others’ experiences with money. In this extract from her new book, A Richer You, Mary Holm tackles questions from readers of her New Zealand Herald column.

Growth on growth There’s a powerful message for all investors here, says Holm.

Q

I was watching YouTube about investing. The guy was saying that after 13.4 years, your investment is making more than you are putting into the investment! I presume that’s the same for any investment. But most people, including me, didn’t know this.

Can you explain how it works?

A

What he’s pointing out is that, once your savings have become reasonably large, even a fairly modest return adds up to big dollars.

Let’s say you’re putting NZ$400 a year into KiwiSaver, and your fund makes a 7 per cent return.

•

•

Early on, your savings total only NZ$1000, so the return is NZ$70 a year – much smaller than your $400 contributions.

But some years down the track, you might have NZ$10,000. The same 7 per cent return will grow your savings by NZ$700 – beating your NZ$400 in contributions. In the video, the guy assumes your contributions grow as your wages increase – which is fair enough. But even so, your returns will grow faster in most years.

76 JUNO |

WINTER 2021

In the example he uses, after 13.4 years the return is bigger than your contribution.

And after another 10 years, the return is twice as big as your contribution. But under different assumptions, those periods would be different. There’s nothing magical about 13.4, even though it sounds a bit magical!

one place. It occurs to me this isn’t the best way to make this decision, but I don’t know where to find any unbiased information on how to assess and choose a scheme based on performance, or if there is another measurement to consider.

The main point is that compounding growth seems slow at first, but it gets more and more powerful. You get returns not only on the amount you are saving, but also on the returns you earned in earlier years.

You’re absolutely right about convenience not being a good reason to have your KiwiSaver account with your bank – although it’s a common enough reason.

There’s a strong message here: start saving – or boost your saving – now! Every year makes a huge difference. Let’s say you reach 65 – and plan to retire then – with savings of NZ$400,000.

Actually, I think it could prove to be a problem when – not if, but when – there’s a major downturn in share markets, and many KiwiSaver balances fall a fair way.

If you had started a year earlier, and your savings are earning a fairly modest 4 per cent after fees and tax, you would have had NZ$416,000.

And if you had started three years earlier, you would have had NZ$450,000.

That’s NZ$50,000 extra to have fun with, in retirement!

Switching KiwiSaver providers How to make a choice. This letter came in before the Covid-19 share market plunge!

Q

My son (six) and I have KiwiSaver with Kiwibank, simply because I like the ease of accessing everything in

A

People who see their account balances regularly, when they log onto their bank website, are more likely to panic and move to a lower-risk fund at exactly the wrong time.

It’s good to check your KiwiSaver balance every few months, but not daily. And even then, remember to hold your course in rough seas.

So how can you find unbiased info on the best fund for you? Go to www.smartinvestor.sorted.org.nz and click on Compare and then KiwiSaver and Managed Funds. You then choose KiwiSaver and the type of fund you’re in.

But first, I suggest you read the writing

PERSONAL FINANCE

underneath, and check that you and your son are in the right risk levels for you.

Then you can compare the KiwiSaver funds at that risk level.

Scroll down a little, and on the right, you’ll see a ‘Sort by’ box. The options include ‘Return’, but I strongly suggest you skip that. Research shows, over and over again, that funds that have performed well in the past won’t necessarily keep doing so.

Instead, choose ‘Fees, lowest first’. Then look through several funds with low fees.

For more information on a fund – including its top 10 investments – click on the fund name and scroll down.

Advice is the same, whatever your age This was right after the Covid-19 share market plunge in autumn 2020.

Q

Help! I turned 65 in November last year and was planning to move a large part of my bank KiwiSaver (40 per cent in a conservative fund and 60 per cent in a balanced fund) into a conservative fund with a private investment company, where I already have a modest amount that has been earning very good interest.

However, I have been watching in horror over the past few weeks as my KiwiSaver has lost NZ$15,000. I feel like a possum caught in the headlights as I have no idea what to do. I had planned to retire in less than two years.

Should I move most of what’s left of my KiwiSaver (NZ$232,000) into the private investment company fund, as I had planned, or just move it all into my bank’s conservative fund?

All the advice I hear from the experts advising KiwiSavers to stay put is for younger people. But what about people like me who are almost at retirement?

A

Relax. You’re okay. That ‘stay put’ advice applies to most people of all ages – at least for the next couple of months, although there might be some wise moves for you to make after that.

This is a good opportunity to check:

people aren’t used to it. The markets will rise again. They always do, usually within a year, although it can take longer. So, I urge you to ignore what’s happening.

But if you must do something, over the next few months consider gradually moving your conservative fund money into your provider’s lowest-risk defensive KiwiSaver fund, which will hold mainly cash and pretty much never drop in value – except perhaps a tiny bit.

If your provider doesn’t have such a fund, move to a provider that does. The KiwiSaver Fund Finder at www.fundfinder.sorted.org. nz lists defensive funds – sometimes called cash funds.

•

Whether your KiwiSaver or other fund is the right risk level – low risk if you plan to spend the money soon, but higher risk for later spending.

With your balanced fund money, try to be brave and leave it where it is. It will recover in time, and grow more than in a lower-risk fund.

•

Whether you can tolerate the volatility of your fund.

Nor would I rush into the other company’s fund. Its future returns won’t necessarily be any higher than where you are, and it might charge higher fees, which eat into returns. For info on fund fees, see the Smart Investor tool on sorted.org.nz.

You seem pretty good on the first count.

Your conservative fund money can finance the early years of your retirement, and the balanced fund money can be for spending later – right on into your nineties, perhaps.

But if you’re a horrified possum (sorry, but I couldn’t resist!), perhaps you just can’t cope with volatility.

The trouble is that we haven’t seen significant market falls for years, and

Just to put things in perspective, your NZ$15,000 loss is about 6 per cent. Over the past few years, you will have gained considerably more than that.

First-home buyer Here’s a letter from a risk-runner.

WINTER 2021

|

JUNO 77

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

Q

I’m a single 45-year-old lady in fulltime work. I’ve been in KiwiSaver since it started in 2007. I currently have NZ$200,000 in it, as I knew I’d use it when I find a house.

It’s in a growth fund.

I found a house recently. I’ve put an offer on and I’m still waiting for it to be accepted. While waiting, I saw that my KiwiSaver balance dropped to NZ$196,000.

Do you think I should move the remaining NZ$196,000 to a conservative fund or just let it stay there? I can still borrow the NZ$4000 I’ve lost in KiwiSaver. The property has only been at market one month so they may take longer to accept me as buyer.

A

You already know my short answer.

When I got your letter, last Wednesday morning, I replied: “I will answer you in more depth in my column this Saturday.

But in the meantime, I would move to a conservative fund as soon as you can.”

Normally, I would yell at someone planning to switch to a lower-risk fund after their balance has fallen. ‘Stop! Stay put through thick and thin and you’ll end up better off.’

But you will probably be cashing in your investment in the next few weeks, and there’s too big a chance your balance will fall further in that time.

Okay, now it’s time for the tut-tutting – although perhaps you are new to the column and can’t be expected to have read one of my repeated messages. So here it is again: “When you get within 10 years of spending your KiwiSaver money – on a first home or in retirement – it’s not wise to be in a growth fund. You can never count on your balance not falling and staying down for several years.”

Instead, use lower-risk funds. It’s all about avoiding what has happened to you.

Actually, you’re lucky that your balance has dropped only 2 per cent. By the time this column is published it might have dropped much more in a volatile market week.

Then again, the markets might bounce back. You might write angrily to me that, if you had stayed put, your balance would have been more than NZ$200,000 by the time you have to hand over the money.

Write away. I don’t mind!

While growth funds always grow over the long term, they can be extremely volatile in the short term, and despite lots of speculation nobody knows what will happen next.

Some people in your situation would be prepared to take the gamble. But research shows that most people dislike losses more than they like gains.

78 JUNO |

WINTER 2021

As it happens, you’ve been lucky over the longer term. KiwiSaver growth funds have all grown healthily in recent years, but such long steady growth is highly unusual.

Neither you nor anyone else planning to spend their KiwiSaver money in the next decade should expect that to continue.

Congratulations, though, on using KiwiSaver to grow a decent house deposit.

Boosting your KiwiSaver A keen saver gets keener. It’s August 2019.

Q

A downturn in stock markets is a good time to double-up investing in KiwiSaver! I am putting away 6 per cent through salary and adding 12 per cent extra through direct debit to my provider. I have 20 years until I can access KiwiSaver.

A

Your email came in when the New Zealand share market and others around the world were wobbling, but it was too late for my last column. Since then, the markets have settled down, or at least they had when I wrote this. By the time you read it, who knows?

As I say so often, it’s not wise to try to time markets. But if you insist, you’re doing it the right way – buying more when the market falls. Too many people sell during a downturn and therefore receive low prices for their shares. Ouch! Anyway, I hope you stick with your large KiwiSaver contributions.

There’s an argument for putting the extra money in a similar non-KiwiSaver fund instead. You’re already getting the maximum KiwiSaver incentives – the 3 per cent employer contribution and maximum government contribution. And outside KiwiSaver you can access the money if

you – or perhaps a family member in crisis – needs it.

But if that’s not an issue for you, adding to KiwiSaver is great. It’s simpler, the fees are probably lower, and the government scrutiny is tighter. And some people like the inaccessibility. They’re not tempted to blow the money on unnecessary stuff.

You’re putting a huge 18 per cent of your pay into KiwiSaver.

While you can’t do that through pay deductions, these days you can contribute 3, 4, 6, 8 or 10 per cent of your pay that way.

Make other contributions directly to your provider. Doubling your contributions – from say 3 to 6 percent – won’t double the growth in your KiwiSaver account, because the employer and government contributions won’t grow.

Even so, raising your contributions can make a big difference. Here are a couple of examples, using the KiwiSaver Savings Calculator on www.sorted.org.nz. I assume the person is an employee who has been in KiwiSaver for five years.

•

A 25-year-old in a growth fund, currently earning NZ$50,000, will have NZ$655,000 at 65 if they continue with 3 per cent contributions. But if they switch to 6 per cent, they will have NZ$930,000.

•

A 45-year-old in a balanced fund, currently earning NZ$80,000, will have NZ$210,000 at 65 if they continue with 3 per cent contributions. But at 6 per cent, they will have NZ$300,000.

Those amounts are not adjusted for inflation. © A Richer You: How to Make the Most of your Money, by Mary Holm. Published

by HarperCollins New Zealand.

ADVERTORIAL

Stop! Think Before You Renovate Kiwis are flat-out renovating to boost the value of their homes.

But if something goes wrong, you might not be covered, says Richard Godman, Vero’s Manager of Technical Underwriting for consumer insurance.

Kiwis love to improve their properties, to make them more liveable and to increase their home’s value.

normal house insurance for anything that involves adding on to the home or taking off roofing or cladding.

Since we were locked down in our homes, we’ve seen a hike in people doing DIY work around their houses.

2. Take out any extra cover you need (like Contract Works).

If you’re doing major work, you might need additional insurance, like the Contract Works policy offered by Vero.

However, many people don’t know that any type of home renovation – whether it’s a project so large you’re moving out for months, or you’re just knocking up a deck on your weekend – can have an impact on your house insurance.

In the worst-case scenario, if something goes wrong, you might not be covered at all.

Here are some things to think about before you start.

1. Check your house insurance policy for any exclusions.

You may not know that most house insurance policies won’t cover major renovations, but some (including Vero) will cover minor, non-structural work. It’s a good idea to check your policy to see what the limitations are.

For example, Vero’s house insurance policy will cover you for non-structural work costing less than NZ$25,000, things like adding a small deck.

However, you won’t be covered by your

www.vero.co.nz

This will work with your normal home insurance and cover any damage caused by the renovations.

Most Contract Works policies will come to an end once your renovations have a Certificate of Completion or Code of Compliance issued.

It’s a good idea to get Contract Works cover from the same insurer that holds your house insurance policy. This makes it more likely that you’ll have seamless cover between your different policies.

3. Notify your insurer.

Regardless of the type and value of the work, it’s a good idea to let your insurer know you’re doing it. They’ll be able to agree to maintain your cover to give you peace of mind, or let you know if you might need extra insurance.

4. Make sure tradies are covered too.

If you’re getting work done by builders, electricians, contractors, or other

tradespeople, check that they have public liability Insurance in place, and find out what other cover (if any) they have.

That means if there’s damage, faults, or issues caused by their work, their insurance could help out.

The information about a tradie’s insurance should be in their Conditions of Contract, so it’s a good idea to sort out your arrangements in writing.

5. Update your insurance when it’s done.

If you’re doing some work on your home, you’d hope it might increase its value. Changes may also affect the amount of money you’d need to rebuild your property if it’s damaged or destroyed.

Once your work’s done, use an online calculator or a registered professional like a quantity surveyor to check your rebuild estimate.

Then you can update the sum insured on your house insurance policy, so you’ll have enough cover if anything goes wrong.

If you have house insurance with Vero, contact us or your broker to talk about any renovations you’re planning. www.vero.co.nz.

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

80 JUNO |

WINTER 2021

PERSONAL FINANCE

Millionaires Don’t Have Jobs The world’s richest people tend to be entrepreneurs or people who founded their own empires. Ben Tutty discovers that millionaires don’t have real jobs – they make their own.

Warren Buffett, Oprah Winfrey, Jeff Bezos.

What do these people all have in common except for being outrageously wealthy?

A certain super-investor you might know, Warren Buffett, reckons it’s not worth wasting your life on a job you don’t enjoy.

They’re jobless.

“There comes the time when you ought to start doing what you want. Take a job that you love. You will jump out of bed in the morning.”

Most of the world’s most successful people don’t have traditional nine to five employment – they’re business owners, inventors, and entrepreneurs. They’re proof that starting your own thing can have limitless benefits.

But what are the risks? And how can you turn your ideas into a profitable business?

Who needs a job?

In some ways, being an employee is great.

For one, you can be fairly certain you’ll receive the same salary every month and you probably won’t lose your job out of the blue. That explains why there’s only one self-employed worker in New Zealand for every six employees. It’s consistent.

Security and reliability are essential, but can also encourage people to stay in jobs that make them unhappy – ones they don’t grow from, and don’t reach their full potential in.

Buffett’s got a good point, but of course there’s a bit more to it than simply finding something you love to do. That ‘something’ needs to pay your bills too.

function without exacerbating anxiety like some caffeinated drinks tend to. The idea may have been simple, but the execution?

Not so much.

“It took seven years of chipping away to make it happen. I was working late nights and weekends on top of a fulltime job to build the business,” Browne says.

“When I finally got there, the transition to fulltime self-employment was liberating – I was finally doing what I wanted to.”

An idea and a side hustle Angus Browne, founder of Arepa, one of New Zealand’s fastest-selling health drinks, realised he needed to make a change when he saw the negative impacts his current job selling energy drinks was having on the world.

Since then, Arepa’s signed a multi-milliondollar deal with Coles to distribute in Australia, hired the world’s leading neuroscientist, and grown exponentially – even during a global pandemic.

“I remember dropping an order off at a dairy and straight after, I saw this little girl walk out with a 710 ml can of the stuff. At that moment I thought what the hell am I doing?”

So, you want to start a business?

You’ve read this far, which means you’ve probably thought about quitting your job like Browne did, and starting your own business.

The idea that helped him transition to being a business owner was simple: create a healthy drink that improved cognitive

It’s fair to say that Browne isn’t going back to selling energy drinks any time soon.

Here are some tips from people who’ve already done it.

WINTER 2021

|

JUNO 81

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

Your Guide to Starting a Business Don’t quit your day job (yet) In their early days, most businesses lose money. That’s a fact. So, it’s unwise to expect to make a living from yours right away. Keep your day job and work on your business after hours, on weekends and during holidays. That way, you can keep feeding yourself and paying rent while slowly building your business up to the level where you can go fulltime.

Browne nailed this part of the process – he used up all his annual leave and worked nights, weekends, and holidays for seven years before transitioning. No one said it was easy!

Start with a problem and a solution The best businesses fix real problems that people have. They make life easier.

So instead of starting with a product or a service, start with a problem and make a product or service that solves it. Build your business around that solution.

Wear many hats, but know your limits At the beginning, most business owners do almost everything within their business from marketing and public relations to sales and product

82 JUNO |

WINTER 2021

development. Learn as much as you can in the early days so that you can wear multiple hats – but always know your limits. Read books, go to seminars, consult the people who know their stuff. If you need help from an expert, recognise that and ask for it. Build a network so you can always ask for help when you need it.

Combine passion and wisdom If you’re passionate about what you’re doing, that’ll drive you forward. But knowledge and wisdom will tell you which direction you should go in. Do something you love and care about but do the research to make sure what you’re doing can really work. People won’t buy something they don’t love – even if you do.

Think about your exit plan When you start or buy a business, you should be thinking right away about how you’ll exit. The key, says Steve Smith, chief executive of ABC Business Sales, is to make sure the business can operate on autopilot.

“It’s all about getting systems, employees and contracts in place so that the business can continue to operate, even if you leave. That way, when a potential buyer looks under the hood, they’ll see value.”

Chris Pescott, the founder, and chairman of Perceptive, one of New Zealand’s leading customer insight agencies put this idea into practice when he sold his company to Clemenger Group.

“My plan was really quite simple.

I always wanted Perceptive to be attractive enough that someone in the marketing industry would want to buy us.”

Pescott told JUNO he made so much money from the deal that his children and grandchildren probably wouldn’t need to work if they didn’t want to.

But, unsurprisingly, he still shows up at the office.

“I could go live on a beach and never work again, but there’s only so much money you can spend.

“I just think you’ve got to have a purpose and I think my purpose has always been to make Perceptive a great company.”

At the end of the day, selfemployment can be a gateway to some good stuff. Freedom, money, meaning – and all it takes is a good idea, great advice, a little luck, and a lot of hard work.

Because millionaires don’t have jobs – they make their own.

Five Minutes With Michael Walker and Selwyn Loekman BlackBull Markets, founded in 2014, has developed into a financial brokerage with a growth trajectory and pedigree envied by its larger, legacy competitors.

The company’s young founders, Michael Walker and Selwyn Loekman, sat down with Brenda Ward to talk about their impressive past and why their future is looking just as exciting.

Can you give us a quick overview of BlackBull Markets and what you do?

Walker: BlackBull Markets is a brokerage allowing investors to trade in foreign exchange, commodities and CFDs (contracts for difference). We provide access to these markets for clients who want to diversify their portfolio after outgrowing their traditional investing platforms.

In just seven years, we’ve made huge inroads into the industry and experienced a breath-taking rate of growth.

Even so, we are always pursuing opportunities to expand our offerings and upgrade our products. For example, we expect to add several new exciting instruments to our platform in the next few months.

Why have you been successful in disrupting the industry?

Walker: It’s a combination of factors.

We easily compete on spread prices, but it is our other characteristics that makes us unique and help BlackBull Markets to stand out from the crowd.

From left, Director Selwyn Loekman and Managing Director Michael Walker.

The company was started with the intention of bringing institutional conditions to retail traders. This means we use technology that ensures the fastest execution times possible, and we personalise the customer service experience. We think this is what separates BlackBull Markets from our competition, and why we’ve been so successful in attracting a significant number of traders over to our platform.

What are you most excited about this year?

Walker: Building our presence in New Zealand. While we’ve always been headquartered here, our customer base is primarily international. This year, we’re making a concerted push to promote the benefits we offer Kiwi traders. Since getting our Derivatives Issuer’s license from the Financial Markets Authority (FMA), we’ve had an ambition to become the go-to brokerage for Kiwi traders.

We’ll soon start hosting regular seminars as a way to connect with traders of all skill levels. We intend to show how and why

Trade with an Award-Winning Broker

trading in forex, commodities, and CFDs can complement an investor’s portfolio.

What misconceptions do people currently hold about trading?

Loekman: I think the most common misconception we hear from investors is that trading is an exceedingly complicated exercise. A mentor once told me that the fundamentals of anything can be learnt in 48 hours. This is an ethos that I believe applies to trading. Once you understand the fundamentals, you have the tools to be successful and upskill at will.

There’ll always be new things to learn with investing and trading. If an investor understands how to use platforms like Sharesies or Hatch, then they’ll find our platform intuitive and approachable. Not to mention, we have an obsessive focus on customer service, so our dedicated account managers are there to help.

Sign up for a free demo account and experience BlackBull Markets for yourself today.

www.blackbullmarkets.com

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

We Answer Your Legal Questions The team at Morrison Kent lawyers answers your legal questions, anonymously. This month it’s Jamie Nunns, an expert in property, trusts, and business law answering your property questions.

Q: I have a KiwiSaver first-home buyer question. Can you still access your KiwiSaver if you are a director of a company that owns property? I’m not a shareholder, just a director only. I meet all other criteria, like never owning property before.

A: This is a question that falls slightly between the lines of the law, on the point and the rules of most of the KiwiSaver schemes.

The answer, unfortunately – is maybe.

You would need to enquire with your KiwiSaver provider and disclose this interest. No doubt, the provider will ask you to answer more questions on how you came to be a director of a property-owning company without having ownership of it.

As the rule stands, if you are already a property owner, you may still qualify for a withdrawal if you are in a first-home buyer’s financial position. But you need to meet specific criteria, which includes:

KiwiSaver is an excellent tool for first-home buyers when actioned correctly.

It’s best to get advice from a property law expert to help you complete your KiwiSaver first-home withdrawal application.

For more information, see our guides at www.morrisonkent.com.

Q: I own a rental house and I’m considering selling a quarter share to my daughter. Am I right that she will be added to the ownership title and, after that, will collect a quarter share of the rent collected, pay rates, insurance costs and maintenance on the property? Is there any other thing I should take into account before going ahead with this deal?

How would I word this in my will because I have two other children who would be beneficiaries?

You have not previously withdrawn your KiwiSaver funds to buy a home.

•

You have been a member of KiwiSaver for at least three years.

•

You have previously owned property, but no longer hold any interest or share in a property.

In terms of the will, whatever you have would (presumably) be divided among the children. However, the quarter share wouldn’t be part of that because it would already belong to your daughter.

•

You do not have assets to the tune of more than 20 per cent of the house price cap for an existing/older property in the area you are looking to buy. Such assets may include:

We would recommend entering into a co-ownership agreement between the two parties which will cover many situations, especially for decision-making and the possible future sale of the property.

2. Shares, stocks, and bonds.

3. Investments in banks or financial institutions.

84 JUNO |

WINTER 2021

•

Who the parties are. This might seem obvious, but there are many possibilities – such as couples, family members, or businesses, in all sorts of combinations.

Each type of owner has different considerations.

•

Who’s responsible for managing the different aspects of the property, such as paying the outgoings, doing work on the property including maintenance, dealing with tenants when it’s rented?

•

What happens if one person wants to sell the property or their share? Is there a buyout mechanism, or do all the parties need to agree?

•

If the property is sold, how will any gains or losses be divided?

•

Are there insurance requirements, such as life insurance to repay a share of a mortgage if one of the parties dies, or income protection insurance in case someone loses their job?

A: You’re right. Your daughter would go on the title and be entitled to a quarter of the incomings and outgoings.

•

1. Money in bank accounts (including fixed and term deposits).

While it’s not a complete list, as circumstances will vary from one collection of co-owners to another, here are some of the more common issues you might need to consider in a co-ownership agreement:

Entering into a co-ownership agreement in these situations is usually necessary for several reasons. A good lawyer will help you identify and consider issues that aren’t always top of mind.

ADVERTORIAL

The idea of buying or dividing property with others needs careful consideration, planning, and good quality legal advice.

Q: What is a charging order? And how long can a charging order be placed on a property? What if that person is now deceased?

A: You can get a charging order from the court when it’s proven that one party owes another money (in other words, a court judgement ordering the payment of money).

A charging order is registered against a title to land.

If the debtor wants to sell property, a charging order prevents them from selling it until the debt has been paid. The debtor must settle the money owing in order to remove the charging order.

These charging orders lapse after two years but can be renewed in certain circumstances. Where the beneficiary of a charging order is deceased, then the charging order belongs to that person’s estate.

Before making an application, it is best to talk to a lawyer who can advise you on your case and highlight the options available to you.

Q: I have a ‘life interest’ in a property.

What does that mean for me as an individual? Another two parties have an interest in the same property. Can I buy their life interest out?

A: Yes, a lease can theoretically be for any term.

That term could be a number of years, decades, centuries, or even 1,000 years.

A leasehold property owner has the right to live in it for a specific term and extend or change the term with the freehold owner’s agreement.

A: A life interest means that you have the right to use or benefit from certain property (which can be money, land, or other types of property) for the rest of your life.

One thing to note, you cannot lease a part of a property for more than 35 years without a subdivision permit from the local council.

At the end of your life, that property goes to whoever was specified as getting it after your life ends in the original document that created the life interest (which is often a will). That person is called the remainderman.

To contact Jamie Nunns, email him at jamie. nunns@morrisonkent.com. Using his expertise, Morrison Kent has successfully helped clients in all areas of property law and have the knowledge and experience to assist with even the most technical of queries.

A life interest can be surrendered, but only with the agreement of both parties. It cannot be done unilaterally.

Q: Can leasehold land be for less than 21 years, say five years from the first date of signing the property’s lease?

www.morrisonkent.com JUNO’s content comes from sources that JUNO magazine considers accurate, but we do not guarantee its accuracy. The content of JUNO is intended as general information only, and you use it at your own risk.

WINTER 2021

|

JUNO 85

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

86 JUNO |

WINTER 2021

PROPERTY

Buying Off the Plans

changed so much that passive, hands-off investors will likely be better off purchasing new-builds.

If you want to develop your section or buy a new build to rent out, purchasing off the plans could be the answer, says JUNO’s economist, Ed McKnight.

The Labour government gave new-builds a significant tax advantage in late March.

Now, investors buying existing properties – those previously lived in – will have to pay a lot more tax. That’s because their interest costs can’t be claimed as a tax deduction.

In some cases, existing property owners will see their tax bills hiking NZ$5000 higher each year.

The government’s signalled that new-builds – properties bought through a developer – will be exempt from these changes.

The new rules are making many investors who previously wouldn’t have considered buying or building to think: “Should I consider buying a new-build?”

Stuart Shutt, general manager of Sentinel Homes, says he’s already had a lot of calls asking what the new rules mean for those wanting to build and he expects it will lead to an upswing in business.

He says it’s about time the government did something to make it more attractive for Kiwis to buy new houses.

“Historically, they’ve worked against us. It’s been easier to buy an existing home.”

Who is buying off the plans right for?

New-builds aren’t for everyone. But they do tend to be the right fit for passive, hands-off investors, or those developing or subdividing a site.

Forget the new Healthy Homes rules. New houses don’t need a lot of maintenance, and there’s little risk of having to replace the carpets or the roof any time soon.

But investors with the time, knowledge, and capital to renovate and improve the quality of New Zealand’s housing stock will still find existing properties a better investment.

What’s the process for buying off the plans?

If buying off the plans is the right fit for you, then there are three main pathways to find a suitable property.

1. Build your own

Government policy is also slanting the economics towards off-the-plans purchases, to grow the housing stock.

If you already have a site to develop, you could approach a building company and look over the plans they have available, or get your own plans drawn up.

Investors buying existing properties need a 40 per cent deposit. In contrast, if they buy off the plans, they’ll only need a 20 per cent deposit.

The benefits to this over buying an existing home are you get a guarantee, you have a new product to rent out, and it’ll be up to the new Healthy Homes standards.

That means an investor with a NZ$200,000 deposit has the choice between investing NZ$1,000,000 in new-builds, or NZ$500,000 in an existing property.

2. Approach developers

Better cash flow The changes to tax laws also mean that new-builds often have a better cash flow than existing properties because they’ll soon pay substantially less tax.

That doesn’t mean existing properties don’t have their place. But they now only stack up if investors significantly improve the yield of a property through substantial renovations.

These active investors will add bedrooms or sleep-outs to properties to earn more rent to compensate for the extra tax they’ll soon need to pay.

The government’s policy will likely have its intended effect. The economics have

If you don’t currently have land, you can approach developers directly to see which house and land packages they have available.

This generally works if you already have a good working knowledge of the areas you want to invest in and a shortlist of developers.

3. Use a property investment company The third is to use a property investment company that specialises in finding newbuild properties for investors.

These companies often don’t charge a fee.

Instead, they make their money by charging the developer when an investor decides to purchase within their project.

This allows investors to access a broader range of properties than they could on their own.

WINTER 2021

|

JUNO 87

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

For instance, Opes Partners – the publishers of this magazine – has relationships with 47 developers and has investors purchasing properties across 63 building sites.

Investors will often consider developers they mightn’t have before, when they work with a property investment company.

That could be because some developers produce quality properties, but don’t have a nationwide brand name. Or because you start to consider areas you might not have thought of before.

What do tenants want?

Property manager, Linda Forsyth from Venture Management says after years of getting bigger, houses are now getting smaller.

Where four bedrooms was the norm in the past, people are now happy with three, and there’s a move to high-density developments, and connected dwellings like terraces and townhouses.

The trend to open-plan living continues, and work-from-home spaces are in demand.

Sentinel Home’s Shutt is also seeing more home-and-income developments, where part of the house is an office or a rental.

Are there fishhooks?

Buying off the plans is different from purchasing an existing property, and there are a few things to be aware of.

First, two payment structures are available – ‘turn-key’ and ‘progressive payments’.

Under ‘turn-key’, investors pay an initial deposit, often 10 per cent, and don’t pay the balance until the end of the build.

Investors generally prefer turn-key to progressive payments, where the investor has to make payments throughout construction.

Trust accounts Next, make sure that your deposit is held in a solicitor’s trust account.

You don’t want this money paid directly to the developer to use throughout the project. If a developer goes bankrupt, which is rare but plausible, you’ll struggle to get your deposit back. But, if it’s held in a trust account, you’ll get it back, with interest.

You’ll also need to monitor the quality of the build at the end of the project. You’ll need to check the developer delivers what they said they would in their marketing material.

This means going through the property thoroughly, checking that there aren’t paint splatters on the carpet, and all the windows work properly. You’ll have 12 months to find these defects and for the developer to repair them. But ideally, these will be fixed before your first tenant moves in.

Independent, goal-focused mortgage advice When it comes to mortgage advice you can rely on, we work with you to create a proposal that best suits your needs, however unique they may be.

GET IN TOUCH

(09) 884 0972 www.lighthousefinancial.co.nz

ACCOUNTING

MORTGAGES

TRUSTS

WEALTH

PROPERTY

ADVERTORIAL

A Clever Tool for Property What do you want to know about a property? Chances are, Relab can tell you.

Buyers and sellers, agents, property developers, and investors are all heading to Relab to get a wealth of information in one place.

The innovative property platform was started four years ago by a couple skilled in technology and data-crunching, as a side-hustle.

Since then, it’s become a one-stopshop research tool for professionals, homeowners and buyers, says chief executive Knight Hou. Their Relab platform brings together the key things you want to know about a property – what it’s worth, what school zone it’s in, what it says on the title, any covenants stopping you doing what you want with it, underground services, recent resource and building consents, and whether it’s worth your while developing the land.

The site’s subdivision feasibility calculator will even tell give you an estimate of how much it’ll cost to build on the site.

Buyers needed help Hou says the website started with a practical purpose.

“My co-founder Leon Hong was going through the experience of buying his first home.

“He had no prior experience, and no one to help him, so we came up with the idea of consolidating all the information that’s very hard to find into one, independent platform.”

Hou says they soon discovered there were other common pain points for people searching for property information

scattered in many different places. So, they fixed them.

“It started with school zone information, but then we found that buyers and sellers were both curious to know the value of a property – the real market value, not the CV.” So, the pair started using algorithms and machine learning to predict the market value of a house at any given time, by comparing it to other houses of that type in the area.

Use data, not emotion “For ordinary Kiwis, their home is their number one asset,” says Hou. “But when you look at how people are making their investment decisions, you’ll find that not many have a very robust methodology.

“You can ask them, what’s your net yield when it comes to buying a house?

“They’ll say, ‘I don’t know, I just like the house and I love the area’.”

Now they can make a more informed decision.

Half a million addresses Word has spread and Relab’s popularity grew, quickly reaching 35,000 users. And Relab’s data coverage has now topped half a million addresses in Auckland, says Hou. Over the Covid lockdown last year, Relab’s team, now grown to four, realised their project was gaining momentum and quit their jobs to work fulltime on it, developing a sustainable Software as a Service (SaaS) business model as their growth strategy.

Smarter Property Data. One Location.

“Icehouse Ventures helped us, along with angel and institutional investors, so we’re now fully funded for the next 12 to 18 months,” says Hou. “We raised a million dollars before Christmas, so we’re able to hire and grow the team.”

As demand grows, the team is always adding new features that their customers need, says Hou. A feature for developers Relab’s newest product is called Advance Search Insights (ASI). It’s tailored to developers looking for their next project.

“A developer might find a threebedroom villa on TradeMe, but it won’t tell you the other information you need to make a development choice, like what’s on the title, whether it’s freehold or cross-lease, or what the zoning is,” says Hou. “ASI lets you search for your criteria.

What’s the minimum land size? You can choose that.

“And we’ve came up with our own matrix, called LV, which is the ratio of the land as part of the overall CV. “You can search for a high ratio. That’ll show that it’s a large piece of land, but the house on it is old or not worth that much. Suddenly you’ve hit a goldmine.”

Another growing area is demand from architects wanting to help clients do their own research. Clients use Relab to do most of the initial due diligence work before they approach a professional, such as an architect or planner.

www.relab.co.nz

New Rules: What You Can Do If you’re a property investor, rule changes may have left you frustrated and worried that you can’t keep growing. But mortgage broker Catalyst has some smart strategies.

Winston Churchill once said: “A pessimist sees difficulty in every opportunity.

An optimist sees opportunity in every difficulty.”

There’s always something valuable we can get out of difficulty, adversity, or change. We just have to look for it with open minds.

Never has this been truer than over the past 15 months as we’ve all adapted to a changing world.

Changes are something that property investors have had to get pretty used to over the past couple of years.

We saw loan-to-value ratio (LVR) changes, Healthy Homes legislation, capital gains tax, and interest deductibility.

It’d be fair for investors to feel hard done by as government changes look to take away our right to build ourselves a better future.

The latest changes strike right to the core of business as well, making residential property investment the only business

activity where we can’t deduct interest as an expense.

It’s crazy stuff but, as I said, with change comes opportunity. If you’re an investor, there are things you can do to help you grow and continue to push towards your financial goal.

New Builds The first and most obvious option is to shift your investment strategy towards new builds.

The government has suggested that new-build investment properties will stay exempt from the latest changes, meaning that interest will remain deductible and the brightline test will stay at five years.

based on the new rules to see whether it’s worth replacing with new builds, or if it’s still viable to hold on to them. Don’t simply assume your best course of action.

Restructuring your lending LVR rules have been a factor for investors to consider for a long time now – since 2015, when they came in.

They’ve been brought to the forefront again in recent times with the move back to 40 per cent deposits earlier this year.

In the space of three months, the deposit investors need went from 30 per cent, to 20 per cent, and then out to 40 per cent to cool the market.

This changes the ballgame of whether to invest in new or existing properties.

On the face of it, this nailed investors’ access to equity and stopped them from growing.

It becomes a no-brainer because new builds are also exempt from the LVR rules and you only need 20 per cent deposit, rather than 40 per cent, and new builds meet the healthy homes rules.

What most investors don’t realise, though, is that a clever restructure of your portfolio and refinancing of some lending can potentially free up equity you didn’t think existed.

If you have a portfolio of existing properties, run the numbers on them

This is because a dollar-for-dollar refinance is exempt from the LVR rules.

www.catalystfinancial.co.nz

ADVERTORIAL

Dollar-for-dollar refinancing is lending with no overall increase in debt.

open up the ability to leverage a further $100,000 of equity.

This can be particularly effective where you have multiple properties with one bank.

You’ll be opening up the possibility of buying again, when you might have thought it wasn’t possible.

Here’s an example of where this could work: Let’s assume you own two properties – your home plus one investment – and both are with one bank, with total lending of $900,000, split like this.

Value

Lending

Home

$765,000

$500,000

Investment property

$500,000

$400,000

If you look at this really simply, there’s only $12,000 of usable equity with this current structure, which pretty much means you’re stuck.

However, if you were to restructure your lending and do a dollar-for-dollar refinance of your investment lending, you would separate your properties and

Near-banks are your friend Near-banks and non-banks are becoming more competitive.

In Australia, they take almost 20 per cent of all new lending, while in New Zealand, that percentage’s been hovering around 2-3 per cent.

Now that’s changing as a growing number of borrowers see them as a genuine alternative to the main banks.

Interest rates in the sub-3 per cent category help, of course!

The good thing about these lenders is that they largely aren’t governed by the same rules as the banks.

This means they can be more ‘creative’.

They may lend with lower deposits, accept less than two years’ financial statements, or use a lower test rate to assess your borrowing potential.

Non-banks have for a long time been seen as a last-resort lender, but markets like this open up big opportunities for these lenders (and new ones) to come into their own as a real option for homebuyers.

Smaller new lenders – such as Squirrel’s new Launchpad – use technology to be more agile in a way that the bigger banks simply couldn’t dream of.

That means they can get their cost of funds to a level that actually makes borrowing from them appealing.

Look for the silver lining The simple reality is that change is always going to happen, in any market.

At first glance, it can be frustrating, and I’ll be the first to admit that I’ve felt a decent amount of that frustration because I’m an investor myself.

However, there’s always a silver lining.

Investors who see change as an opportunity and look for ways to use it to their advantage will continue to grow.

You’ve just got to know how to swing things back in your favour.

Better Outcomes. Now.

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

Go to www.opespartners.co.nz to book a free property portfolio planning session.

PROPERTY

Become Friends with Debt Should you pay off your mortgage or reinvest? You’ll build wealth faster if you use the bank’s money to turbocharge your investment strategy, says Andrew Nicol.

Become investment-friends with debt. Debt is a feature of property investment – not something to be scared of.

The benefit of investing with other people’s money is that you can buy much more valuable assets than you could on your own.

This multiplies your returns as your asset increases in value.

Here’s how it works Say you have NZ$100,000 as a deposit which you can use to purchase a NZ$500,000 property.

If the property then increases in value by 20 per cent, it will be worth NZ$600,000.

This is not a 20 per cent return but a 100 per cent return on your deposit.

Instead of NZ$100,000 invested within the property, you now have equity of NZ$200,000.

Many people in New Zealand think that property is an attractive asset class because there’s a housing shortage.

But the real reason property is an attractive class is that it’s easy to borrow against.

Supercharge your returns Let’s take Clinton from Auckland – an investor I work with – who bought an apartment in

www.opespartners.co.nz

Christchurch for NZ$385,000 18 months ago.

He used a NZ$77,000 deposit to buy it.

In May 2021, he was interested in buying another investment property, so we ordered a valuation. It came back at NZ$530,000.

Once you take off his mortgage, he’s left with NZ$222,000 worth of equity. That means his equity increased 188 per cent over that 18 months.

Over the same time frame, property prices in Christchurch increased by about 27 per cent.

The key driver of Clinton’s returns wasn’t the increase in property prices, but the leverage.

Using debt means that Clinton and other property investors like him can get much better returns than they would otherwise.

Why pay more tax?

Many people are unaware that paying down debt can lead to their paying more tax than they need to.

I see many investors who are determined to pay off their investment property mortgages. But often, that’s not the right financial decision. For instance, if you have a personal mortgage, it is almost always better to pay that mortgage down before paying down the investment loans.

That has two benefits.

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

First, it de-risks your living situation. If you can pay off your personal mortgage, then you can unencumber your property, so the bank has no claim to your home. That’s the case even if the worst happened and you defaulted on your investment mortgages.

Also, if some of your properties can claim interest deductibility, then you’ll pay less tax if you focus on paying down personal mortgages before investments.

Paying down personal debt is always a good idea.

Paying down investment debt is not always the best financial decision.

It keeps you from investing Most properties need to be ‘topped up’ each week when the mortgage is set to principal and interest.

The rent will generally cover the rates, insurance, maintenance, and mortgage interest, but the investor may have to pay the principal portion themselves.

If this costs NZ$150 a week, you might be tempted to put off investing in property until you’ve paid off your personal mortgage.

After all, you might not have the spare cash right now to pay your home loan and the investment top-up.

However, it’s still worth buying the property sooner rather than later, even if the debt’s not reducing. That’s because then you can benefit from any natural increase in value the investment might get while you’re paying down other debt.

credit’ or offset mortgage to reduce their interest repayments while also having access to the cash.

On the other hand, if you wait to invest until you’ve entirely paid off your personal mortgage, that property may now be more expensive and cost you more.

This works a bit like a giant overdraft.

In this case, you could take a NZ$30,000 portion of your home loan and set it up as a revolving credit.

What if I inherit some cash?

If you inherit some cash, should you put it against the mortgage?

You can then use your inheritance to pay off that revolving credit. This reduces the amount of interest you’ll pay over the life of the loan.

Let’s say you’ve paid off your personal mortgage, and you are paid a bonus or receive an inheritance of NZ$30,000. You might think it’d be good to pay off some of your investment mortgages.

But then, if you ever need to access those funds for an emergency or to invest in another property, you don’t have to reapply to the bank.

You can simply withdraw it.

That might be true. But remember, that once you put that cash towards the mortgage, it’s spent.

You’ll then need to apply to the bank to borrow it back.

That’s why many investors will use a ‘revolving

Paying down personal debt is always a good idea. Paying down investment debt is not automatically the best financial decision.

Using debt in this way can give you added flexibility so that you can respond to life changes.

Learn about debt Get to know debt and it can become one of your best mates in investment. Shy away from it and you may miss out on a beautiful friendship.

Go to www.opespartners.co.nz to book a free property portfolio planning session.

THINKING ABOUT

Developing your land?

Recent clients transformed an old home on an 800m2 section into 7 town houses!

You no longer need to be an experienced property developer to subdivide and build!

Common Urban Subdivisions

There has never been a better time to invest in your property, there’s an appetite for construction finance from major banks and the recent changes to the bright-line period do not apply to new builds.

We have years of experience helping clients through the subdivision process, from planning and design through to finished homes, talk to us today!

Call 0800 456 321 or go to sentinelhomes.co.nz/subdividing to learn more and book a free site check.

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

Will House Prices Keep Rising?

After some crazy months in the housing market, Wendy Alexander of the REINZ looks at her crystal ball to predict what could happen next.

With national house prices having risen by nearly a quarter (24.3 per cent) since the same time last year, the Kiwi dream of owning your own property feels further and further away for so many people around the country.

So, it’s no surprise that one of the most common questions agents, economists and property professionals are being asked at the moment is, are house prices set to keep rising, and if so, for how long?

The supply problem The issue of building more homes to meet supply will continue to be a challenge, given that New Zealand needs an estimated extra 100,000 residential properties.

As a country, we haven’t made significant headway on constructing new homes at the volumes we need for some time now.

Building consents are at their highest point since 1974, but those dwellings still have to be built, and demand is not being met in almost all of the provinces.

Working remotely has become more acceptable in many sectors, which we see as fuelling movement between the regions.

If we can start to build as many of those properties as possible that have consents approved, hopefully this will start to slowly add to the pool of houses for people to buy and stabilise house prices.

The inventory issue Another driving factor behind house price rises is the lack of houses to sell.

Houses are selling so quickly that the new

listings coming onto market are just not filling the gap.

reinstating the LVRs in two tranches (1 March and 1 May), it was a relief for many.

In fact, total inventory levels are down by 18.2 per cent for the 12 months ending March 2021 when compared to the previous 12 months.

People saw that the limits had worked in the past as a brake on the investment property market, so hopefully they would work again now that the market has returned to normal, if there’s such a thing any more.

That’s 48,000 fewer properties – and given we sell on average 7,400 houses each month in New Zealand, that would mean we’d need to stop selling houses for at least six months to make up the deficit.

Clearly that’s not going to happen, so if we want to stabilise house prices or even just ensure that rising prices are at a more sustainable level, we need to do something about the vicious cycle that sees people buying before they sell.

The LVR changes When COVID-19 first hit our shores in late February last year, no one knew exactly what the impact would be on the housing market, let alone the wider economy.

The Reserve Bank rightly introduced a number of measures designed to underpin and support the wider economy (and the housing market), and the removal of the LVRs was a positive step for the Reserve Bank to take.

However, as we’ve seen, the combination of the record-low interest rates, removal of the LVRs and the lack of housing supply and houses to sell has put significant upwards pressure on house prices.

So, when the government announced at the beginning of this year that it would be

Unsurprisingly, there was a rush to buy ahead of the 1 March date. However, what did surprise people was the strength of the price rises in March.

Most commentators expected there would have been a greater impact earlier on. We suspect that it might take until after the 1 May deadline to start to achieve the results the Reserve Bank is looking for.

The interest rate ‘problem’ Ironically, despite New Zealand having record-low interest rates, buyers are still frustrated as they ask for home loans.

There are multiple offers on properties but the banks being very conservative when it comes to lending because they know there’s no guarantee that rates will stay at these levels.

So, what’s likely to happen to house prices?

It is REINZ’s expectation that house prices will continue to rise for the next couple of months, although at a slower pace.

Then, hopefully, as we head into the coldest months of the year, we might start to see the market stabilising and potentially some easing of prices.

Wendy Alexander is Acting Chief Executive at the Real Estate Institute of New Zealand (REINZ).

www.reinz.co.nz

PROPERTY

Median House Price Changes Year–On–Year March 2021

Northland

26.8%

Bay Of Plenty

24.5%

Auckland

18.5%

Gisborne

Waikato

56.9%

22.7%

Taranaki

21.2%

Mananawatu/Wanganui

Hawke’s Bay

31.9%

30.5%

Tasman

19.6%

Wellington

24.9% Nelson

13.7%

Marlborough

27.7%

West Coast

36.4%

Canterbury

17.8% Southland

12.2%

Otago

30.8%

National Median Price

Up 24.3%

www.reinz.co.nz

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

Have You Got What It Takes?

There are behaviours that mean some people are more likely to make a go of their business. Otherwise they may struggle. Chris Small, managing director of ABC Business Sales, shares the keys to success.

Have you always dreamed of running your own business and becoming an overnight millionaire when you sell it?

Many people dream of this scenario, and many will have the right temperament and the right skills to make the dream come true.

At ABC Business Sales, we analysed the 400-plus business sales we do each year and came up with the top traits we saw in the most successful business owners.

People skills I find the most important and common trait of successful business owners is their ability to relate to people and build relationships. I call this trait ‘people skills’.

People with these skills can communicate effectively and decisively, be charming and affable, and they’re easy to deal with and talk to.

Business owners all have customers, suppliers, and staff.

If you can build strong and long-lasting relationships with all these people, your probability of operating a successful business is a lot higher.

Drive and structure To grow any business, you need a drive to forge ahead and succeed, backed by a structured approach.

But this quality needs to be supported by structured goals and targets, so all this energy is channelled into the right areas at the right times.

We all know people who work hard and put in the long hours. But if they’re not working in the right areas, they’ll get a below-par result.

As a business owner, you don’t have the luxury of channelling work into the wrong areas.

To be successful, all your hard work needs to be spent on the correct areas of the company.

Money skills I see often that being budget and financially minded is something the most successful business owners have in spades.

In today’s world, business success is very much viewed in tandem with financial success.

To achieve financial success and see healthy profits, you need to have a clear understanding of what your current financial position is, and the actions you need to take to improve this position.

Make numbers your friend.

Both? Yes. Drive and structure are joined at the hip and can’t live without each other.

You’ll need to be able to understand and interpret basic financial statements like a Profit and Loss statement (P&L) and balance sheets, so you know just where your money is going and the profit you’re making.

A business owner needs the drive and motivation to get up early, work long hours, and make the tough decisions.

Yes, it is possible to employ staff who have these skills, but if we’re talking about the very best business owners, they’re all very

98 JUNO |

WINTER 2021

financially literate. It’s a skill set I believe is super-important in today’s business world.

Resilience Resilience is talked about a lot these days and I see this quality very often among elite business owners.

Also called ‘bounce’, resilience is the ability to recover quickly from difficulties – to bounce back.

Business ownership is the most rewarding career you can have when everything is going well, but it can be hugely disappointing when you experience setbacks.

When you face tough times and setbacks, it becomes personal and you have no one else to blame, unlike if you worked for a big corporate when it’s always the company’s fault.

People who can accept failure and mistakes, and can bounce back and come back even stronger make fantastic business owners.

Confidence Confidence is associated with many highly

BUSINESS

successful people across all industries – sportspeople, actors, musicians, business owners, and politicians.

Some role models Let’s look at the kind of people I’ve seen do well when they bought a business.

The interesting thing about confidence is how it can spread through an organisation and the effect it has on staff morale and culture.

One Air New Zealand pilot bought an engraving business, and two ex-pat professionals bought a plant nursery.

Successful business owners all have confidence in their own ability, which lets them make quick and definitive decisions.

In both these cases, previous work history and qualifications were irrelevant.

This gives them a competitive advantage and makes them easy to work with.

No barriers to entry If you feel that you have many, or all, of these traits, owning a business might be a great career path.

The best thing about becoming a business owner is that there are no barriers to entry.

You don’t need any qualifications – and if you have the right attributes and traits, the likelihood is you will be successful.

Prior business experience is more important than any formal qualification, but every business is different, so previous experience is not as relevant as having the right personality and skills.

It was their ability to build relationships, work hard, deal with difficult situations, and understand the financial aspects of their businesses that has helped them prosper in the world of business ownership.

At ABC, we keep records of all the businesses we sell.

•

98 per cent of businesses we sell continue under new ownership.

•

A small minority (just 2 per cent) end up closing or are liquidated.

The numbers are almost the opposite for business start-ups, where the news is not good.

•

90 per cent of start-ups fail in the first two years.

•

Only 10 per cent are still running two years later.

Take the plunge If you have the right skills and character for business ownership, don’t wait.

People tell us again and again that it’s the most financially and emotionally rewarding decision they’ve ever made in their working career. They wish they’d done it sooner.

You can boost your chances of success if you buy an existing business and have the right personality traits.

I’m talking from experience. Four years ago, I was working at a bank on a salary and now I’m an owner and the Managing Director of ABC Business Sales. It’s been the best career decision of my life.

Get in touch It’s our job at ABC Business Sales to match buyers with the right business, so everyone gets a great outcome. If you’re thinking of buying or selling, go to www.abcbusiness.co.nz, email chriss@ abcbusiness.co.nz or call (0800) 180 222.

WINTER 2021

|

JUNO 99

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

A safe way to ask for help

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

When medical student Elizabeth Berryman was being bullied in a hospital, she had panic attacks and couldn’t see any way out of it. She decided to quit.

But the Dean of the Medical School pointed out that she was one of many in the medical profession heading to a toxic workplace every day. Says Berryman: “He told me: ‘I’m sick and tired of seeing our brightest students leave because of our environment that we’re putting people into. What shall we do about it?’.”

She said she’d like to do some research into it. With a small grant, she assembled a research group.

Talking to doctors and nurses “I did interviews with doctors and nurses about their mental health and about their workplace settings and psycho-social risks.”

Fund has Māori world view A fund that uses indigenous Māori values to make investment decisions will soon open to retail investors.

TAHITO is the brainchild of experienced investment consultant Temuera Hall, partnering with Investment Services Group (ISG).

The fund started 18 months ago for professional investors and institutions.

Now it’s opening to retail investors, through platforms like Sharesies and InvestNow, as well through the Select KiwiSaver Scheme.

Hall says the fund is believed to be the first indigenous investment fund in the world and that the timing is right for it.

“We’ve long believed that leveraging our indigenous wisdom for business could offer real benefits for all involved.”

Tahana Tippett, Business Development Manager at sister company Select Wealth Management, says TAHITO is about growing ‘aroha connection’ and developing the relationships between people and the environment.

“The Māori world view illustrates that all things are interrelated, nothing exists of itself – the sky, the land, the people, the stars, the ocean and emotions are all one,” he says. “TAHITO makes decisions with that in mind, to rebuild those connections and make the world a better place.” www.tahito.co.nz

Beat recruitment black holes Have you ever been disappointed no one got back to you when you applied for a job?

Did your CV just fall into a black hole?

If it did, there’s probably a good reason for that, says Chris South, CEO of ROI-AI. “One recruiter will deal with as many as 10,000 candidates,” he says. Managing responses takes up a lot of time.

More efficient So, the former recruiter joined with investors from the software and recruitment industries to set up a platform that helps recruiters work more efficiently.

ROI-AI automates key parts of the recruiter’s role, he says, sending reminders and emails. A recruiter’s best source of 100 JUNO |

WINTER 2021

jobs is word of mouth, he says, so referrals can be ‘gamified’, rewarding people with points, so they earn rewards.

Chatbots also help people without tying up the recruiter.

“Know when a client opens a CV, or when someone you placed visits your job board.” https://roi-ai.com

They told her they wanted an app to be able to report anonymously what was going on for them on the frontline. “I said, ‘An app?

There are a million apps out there’.”

They said, yes, they wanted a safe channel to speak up. So, chnnl was created as an app gathering anonymous insights and data on staff mental health and wellbeing.

Berryman’s now working on a fourth clinical trial.

She says since legislation changed in New Zealand in 2016, directors are now responsible for employee health and safety, so boards are taking it seriously.

The platform has identified many people who are depressed and at risk for suicide, Berryman is looking for investors for chnnl’s second funding round, which opened on April 1. www.chnnl.app

P R O U D LY MAR LB O RO U G H

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

Save & Splurge

1

Splash out on the big pieces that matter in your décor, then enhance with low-cost accessories.

2

3

7

5

6

1. Kiss me cushion – www.suprette.co.nz, 2. Karen Walker Runaway EDP 100ml – www.karenwalker.com, 3. Tiilskivi teapot in Terra Dark Green – www.boltofcloth.com, 4. Set of porcelain mini-vases in Pastel Red – www.boltofcloth.com, 5. Townsend outdoor firepit – www.earlysettler.co.nz, 6. Green Herbarium Demitasse cup and saucer double set – www.gucci.com/nz, 7. Paul Cullen ‘Gravity’ Rug – www.goodform.co.nz 102 JUNO |

4

WINTER 2021

Colour your walls to match your gear.

8

9 14

Resene Cardin Green 10

Resene Mai Tai

13

Resene Blossom 11

12

Resene Champagne

Visit your local Resene ColorShop for more colour ideas and inspiration.

8. Mamba bottle opener – www.crisphome.co.nz, 9. Finn Juhl ‘United Nations’ clock, Architectmade – www.goodform.co.nz, 10. Birkenstock Arizona regular fit Shearling Mink – www.karenwalker.com, 11. Salt and pepper box – www.suprette.co.nz, 12. Warm Nordic Galore Sober velvet sofa in Orange – www.goodform.co.nz, 13. Rickaby Boot – www.rmwilliams.com.au, 14. Gucci Horsebit 1955 mini top handle bag – www.gucci.com/nz

www.resene.co.nz

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

1.

2.

Cooler Classics Invest in fewer clothes for winter, but make sure they’re quality garments.

8.

3.

7.

6.

1. Hawker Zip Brigalow shirt www.rmwilliams.com.au/nz 2. Cavalry Twill Trouser, in brown www.crane-brothers.com 3. Fitzroy sneakers www.rmwilliams.com.au/nz 4. Bennett Winch canvas Weekender bag www.crane-brothers.com 5. Rickaby boots www.rmwilliams.com.au/nz 6. Glen Check Brushed Wool Cashmere Pea Coat www.crane-brothers.com 7. Beige Speckled Wool Cashmere Herringbone Coat, Ink Merino Sweater, Winter White Broken Twill Chinos, Washed Denim Button Down Shirt www.crane-brothers.com 8. Astro wash bag www.deadlyponies.com/nz

4.

5.

104 JUNO |

WINTER 2021

LIFESTYLE

2.

1.

3.

4.

7.

5.

8.

6.

1. Moi pants in olive www.minaforher.com 2. Camilla and Marc Scott shirt www.nz.camillaandmarc.com 3. Comfort boots in Tobacco suede www.rmwilliams.com.au/nz/ 4. Phantom Black handbag www.deadlyponies.com/nz 5. Millicent boot www.rmwilliams.com.au/nz/ 6. Tarantino blazer in Biscuit www.nz.camillaandmarc.com 7. Frida coat in Pecan www.minaforher.com 8. Zippy bag in Forest www.deadlyponies.com/nz

WINTER 2021

|

JUNO 105

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

Extracted from Destitute Gourmet by Sophie Gray, published

by Random House NZ, RRP $35. Text © Sophie Gray, 2021.

Photography © Todd Eyre, 2021

The Destitute Gourmet Want to impress for less? ‘Destitute Gourmet’ Sophie Gray says she wants to cook and eat tasty, healthy, fashionable food that doesn’t cost a fortune.

Honey-Baked Haloumi Salad with Raspberry Basil Vinaigrette READY IN: 20 MINUTES + 15 MINUTES MARINATING SERVES: 4–6 Raspberry Basil Vinaigrette 2 tbsp lemon or lime juice 1 tbsp balsamic vinegar 1/2 cup raspberries (fresh or defrosted) 1 tbsp chopped fresh basil Pinch of salt 1/8 tsp Dijon mustard 2–3 tsp honey, to taste 1 tbsp olive oil Salad 3 tbsp olive oil 2 tbsp honey Handful of oregano leaves, finely chopped Zest and juice of 1 lemon 2 cloves garlic, crushed 2 x 225g blocks of haloumi, cut into thick slices Baby leaf salad for 4 people 1/2 telegraph cucumber, sliced into ribbons 1/2 cup fresh raspberries 1/2 cup toasted walnuts Bread, to serve

106 JUNO |

WINTER 2021

Serve as a salad, light meal, or meatless main course. Haloumi has a mild, sweet flavour and an engaging squeaky texture.

1. Make the dressing. Blend the dressing ingredients in a processor or blender.

Sieve to remove solids if desired. Set aside in the fridge.

2. Make the salad. In a shallow, nonreactive dish, combine the olive oil, honey, oregano, lemon juice and garlic.

Coat the haloumi in the mixture and leave to marinate for 15 minutes; or keep overnight, covered, in the fridge.

3. In a frying pan or on a grill plate, cook the haloumi for 1–2 minutes on each side, till browned but not runny.

4. Arrange the salad leaves and cucumber ribbons on a serving platter or plates, and add the haloumi, raspberries, and walnuts. Drizzle the haloumi with any remaining marinade. Serve the salad with Raspberry Basil Vinaigrette and good bread.

TIP: Serve as a vegetarian main course.

If barbecuing, place the haloumi in a small pan on the barbecue, clear of cooking meats.

LIFESTYLE

Seriously Good Slab Pie with Flaky Crispy Crust READY IN: 1½ HOURS SERVES: 10 Pastry 400g (3 cups + 3 tbsp) plain flour (not high-grade) 300g cold butter, cubed 1 1/2 tbsp brown sugar 250g cream cheese, cubed 1 tsp cider vinegar 2 tbsp iced water Beaten egg, to glaze 2 tbsp sugar, to sprinkle (optional)

Plum Filling 2 x 800g cans Black Doris plums, drained in a sieve and stones removed 1/4–1/2 cup brown sugar Squeeze of lemon juice 2 tbsp arrowroot

Sturdy enough for a picnic and elegant enough for dessert, this is the kind of pie that makes you fall in love with baking all over again. A processor is required for this pastry.

It’s a really good dessert for feeding a crowd, and it also freezes well, so can be made ahead. I use whatever fruit I have on hand, from home-bottled peaches to lightly cooked stewed apple, or just drained canned fruit without the juice. See the tips below for suggestions.

1. Make the pastry. Place the flour, butter, sugar and cream cheese in a processor and pulse to form a coarse crumb. Add the vinegar and iced water and pulse to mix. The dough will be crumbly at this point. Turn out onto the bench and press it, turning and folding, until it holds together. Cut into two uneven halves, flatten into thick discs with your palm, wrap and chill in the fridge for 30 minutes.

2. Preheat the oven to 200°C. Make the filling. Place the plums (or whatever fruit you are using) in a bowl with the sugar, lemon juice and arrowroot, and mix lightly.

3. Roll out the larger piece of dough so that it lines a slice tin about 23cm x 33cm with an overhang all the way around. Pour in the plums and liquid from the bowl.

Tips: Some supermarket brands of cream cheese are only 225g, in which case you can make up the difference with extra butter.

4. Roll out the second piece of pastry to slightly larger than the dish, and cut it into wide ribbons. Lattice the dough ribbons over the top of the pie. Neaten the overhang with scissors, then fold the overhang inwards all the way around so that it rests on the rim of the tray. Crimp with your fingers.

Some suggestions for fillings: Try approx. 750g (around 5) peaches, peeled and sliced, and 1 cup of fresh or frozen berries or an equivalent quantity of other fruit. You can even use canned apple pie filling plus rhubarb or feijoas. If using a firm fruit like persimmons (very good with cranberries), I slice and microwave them for around 3 minutes first to soften them slightly.

5. Brush the pastry with beaten egg, sprinkle with sugar if desired, and bake for 35–45 minutes until deep golden.

WINTER 2021

|

JUNO 107

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

A World-Class Luxury Experience Continental Cars BMW is growing. It’s expanded to launch a world-class new North Shore showroom and has taken over both the Wellington BMW dealership and the Wellington MINI garage.

Motorists travelling on Auckland’s northern motorway will have spotted an innovative feature of one of the most luxurious car showrooms in New Zealand – a glass box rising above Wairau Road.

Inside you can see one of Continental Cars BMW’s premium vehicles, just a peek of what’s below, inside the country’s biggest and most impressive luxury car showroom, in Wairau Road on the North Shore.

Geoff Light, Dealer Principal at Continental Cars BMW, says since the new multimillion-dollar showroom opened in November, it’s quickly became a destination for lovers of the European 108 JUNO |

WINTER 2021

performance marque eager to check out the four-level, eco-friendly building – and the latest M-Sport models.

“We’ve thought of everything, from dedicated showrooms for M-Sport and electric vehicles, to making sure there are plenty of parking spaces for a hassle-free experience.”

We love M-Sport He says many of those visiting the showroom are BMW M-Sport lovers, because Kiwis have the world’s highest number of M-sport fans per head of population.

M-Sport models are sought-after highperformance cars, a badge that grew out of BMW’s racing programme.

The new showroom rises over four levels, can showcase more than 150 cars, has multiple electric vehicle charging stations, and service facilities for both BMW and MINI models.

Light says a popular feature is the new undercover ‘drive-in’ service centre, which employs the most experienced team of BMW technicians in the Auckland area.

“There are three BMW Qualified Master Technicians on the team, making the new dealership the new home for everything BMW,” he says.

ADVERTORIAL

Delivery suite Bought a new BMW? There’s even a bespoke ‘delivery suite’, where buyers and their families are made to feel special when they get the keys to their new vehicle, seeing it unveiled with a flourish.

The new dealership is eco-friendly, featuring solar panels and rainwater catchment and recycling for washing cars, as well as electric vehicle charging stations for BMW’s huge investment into electric and hybrid vehicles.

Both new and used cars on display If you’re still saving for a new car, the dealership also has two levels of premium used cars.

Says Light: “We promise our premium used car clients they will receive the same brilliant customer service as the people buying our latest, top-of-the-line models.

“All our customers are important to us, whether they are looking to purchase or service a vehicle.

There’s no reason anyone should miss out on the luxury car experience.”

Leather chairs and a bar with a professional coffee machine entice visitors to spend some time in the showroom, so they can ask about the world-class features of the models.

Light says he couldn’t be prouder of the new showroom.

“It’s a sign of Continental Cars’ commitment to the BMW brand in New Zealand, and its focus on customer service.”

Expansion into Wellington After more than 50 years of history in Auckland, the Continental Cars group is expanding its operations into the Wellington region, after buying both the BMW and MINI Garage dealerships in late 2020.

The dealerships are committed to delivering the same level of excellence in everything they do, with passionate and knowledgeable staff at both locations keen to talk to car lovers.

NED TO DEFY THE ODDS.

PADDY HOPKIRK TO EDITION. DESIGNED DEFY THE ODDS. THE MINI PADDY HOPKIRK EDITION.

ni to the 1964 Monte Carlo rally, he was far from the favoured racer. So when he took home the first-place trophy in his Mini the same way again (there were another two wins after that, just in case you didn’t know).

When Paddy Hopkirk took a Mini to the 1964 Monte Carlo rally, he was far from the favoured racer. So when he took home the first-place trophy in his

I challenger spirit and the victory we never doubted – the MINI Paddy Hopkirk Edition. Just like Paddy’s 1964 rally car, bright red ride, no one looked at Mini the same way again (there were another two wins after that, just in case you didn’t know). in red, Chili Red to be exact, and it is full of special edition features right down to a unique ‘37’ MINI Key. Meet our celebration of the MINI challenger spirit and the victory we never doubted – the MINI Paddy Hopkirk Edition. Just like Paddy’s 1964 rally car, aturally. this special edition is a race car in red, Chili Red to be exact, and it is full of special edition features right down to a unique ‘37’ MINI Key.

Oh, with and there’s stripe.in Naturally. ition is special, only a48racing available New Zealand.

WeGarage. mean it when we say this edition is special, with only 48 available in New Zealand. ellington MINI Get in quick, like Paddy. Visit Wellington MINI Garage.

For more information on Continental Cars BMW, visit www.continentalcars.co.nz/bmw

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

Travel (Almost) Free You don’t have to be a millionaire to travel well and explore New Zealand – and the world, says Ben Tutty.

Kiwis spent 9 billion on around 3 million trips overseas before COVID-19 changed the world. That’s an average of just under NZ$3,000 per trip.

Campervan relocation Campervan rental companies offer deals in New Zealand and all over the world from as low as NZ$1 a day. The only catch is you have to drive between two chosen locations in a certain time frame.

Usually, you’ll get up to five days (almost) free and you can pay reduced rates if you’d like to extend your trip.

Jo Yates runs her own small video and

PR agency called Cwtch, and has made the most of these deals to travel all over Australia and New Zealand: “The first time I arrived in Oz, I did a relocation with my friend. We thought we were so baller, because we had a brand-new Merc van for $1 a day,” says Yates.

“You need to be flexible, and you could end up with something not quite a hundred per cent to your specifications. You also might not get the exact dates you want.”

We’re spending a bit less post-lockdown but travelling in New Zealand is undeniably expensive.

In fact, a family of four would be lucky to get five days in Queenstown in mid-range hotels for NZ$3,000.

But, luckily, there are other ways to travel and live in luxury for less – as long as you keep an open mind.

Luxury travel on a freelance writer’s budget Back when I started working remotely as a freelance writer, I barely had two gold coins to rub together.

The only way I could afford to holiday in fancy hotels was to win Lotto or sell my organs on the black market.

I decided I didn’t want to stay at home, and I liked having two kidneys, so I found cheaper ways to travel.

My first discovery was a website called Trusted House Sitters. I found two back-to-back housesits in Singapore, each two weeks long, staying in luxury apartments and looking after two miniature schnauzers and a German shorthaired pointer.

Long story short, I ended up living in Singapore for a month.

Despite the fact that Singapore is one of the world’s most expensive travel locations, my partner and I had spent under NZ$3,000 on the trip, including flights and a total of NZ$0 on accommodation.

Holiday hacks: Get away for free After that experience I was hooked. I found so many more ways to travel for free – or for less.

These holiday hacks may not be for everyone, but they could help you enjoy a longer, better, cheaper, and more interesting getaway. God knows, we all need a holiday right now.

110 JUNO |

WINTER 2021

House-swapping If you’re lucky enough to own property in New Zealand and your hair’s not grey, chances are you’ve got a giant mortgage.

This can make travelling tricky, especially with a family.

Kiwi mum Stephanie Georgalli solved the problem for herself and thousands of other Kiwis by founding the website Kiwihouseswap.co.nz.

The concept is simple. You add your home to the website, contact the owners of other houses you like the look of, and arrange a swap.

“I’ve travelled every year for the last eight or nine years, all with houseswapping. It’s the best way to travel – you get all your creature comforts and usually house-swappers are happy to look after your pets,” says Georgalli.

There are some awesome opportunities to visit the country’s most beautiful locations without paying for accommodation.

“My last one was to Coromandel

in a house near the beach.”

With that in mind, it’s not surprising that the site has surged in popularity during 2020 and 2021, with countless new listings and sign-ups.

Turns out it’s a great time to be a house-swapper!

AMA ZING PL ACES

House-sitting Since lockdown, the local version of Trusted House Sitters, Kiwihousesitters. co.nz, has seen a huge increase in traffic, says managing director Nick Faud.

The website charges NZ$84 for 12 months’ registration and it’s free for homeowners.

It takes a few minutes to make a profile as a sitter, then you’re free to apply for house-sits in homes all over New Zealand. If you’re lucky, the homeowner will choose you and voilà – free accommodation.

Right now, there are around 100 new listings including a pug in a house near Lake Wanaka for a week, and a kitten in an old Grey Lynn cottage.

Faud says it’s an arrangement that works for both homeowners and house sitters. “The sitter can live rent-free, travel on a budget, enjoy living like a local and caring for pets.

“The homeowner has the luxury of free house security, pet care and maybe a little garden maintenance.”

Couch-surfing If you’re not on holiday with the whole family, travelling cheaply can be easy. Just jump over to www.couchsurfing.com, pop in your chosen location and dates and you’ll find locals volunteering their spaces for free.

Sometimes you’ll get the couch, but in others you’ll get your own room and a bed.

Van life If you’re willing to sacrifice a little luxury on your next holiday, there are a few alternatives that can help you spend less and holiday for longer.

For Kiwi couple Rachel and Scott from Auckland, travelling and sleeping in a converted van allowed them to explore Europe for 6 months on two separate occasions.

Rachel says the freedom of travelling this way is a huge plus: “You get off the beaten track, appreciate the small things and learn to live a minimalist lifestyle. You meet lots of interesting people at campsites and wake up with a view.”

If you’re considering van travel, Rachel says having it’s a must to have a mechanic check your van before you buy it. Look for free parking where possible, and always keep valuables hidden if you’re freedom camping.

“Put a New Zealand flag in the window if you’re overseas if you can. We got treated much nicer when people realised that we were Kiwis!” Rachel said.

Plus, according to keen couch-surfer and 23-year-old marketing professional Chloe Mcleod, you’ll make genuine, authentic connections along the way.

“You really get to see the hidden gems. My hosts have taken me to so many spots I wouldn’t have found if I weren’t couch surfing,” she says.

“I developed a close friendship with one host, Pang, who invited me into her student dorm in Thailand. I went back years later to visit her, and we still keep in touch on Facebook.”

Mcleod adds that to make sure you’re safe, you should always read reviews, meet your host in a public space and tell someone where you’re staying.

Working for accommodation Don’t mind a little hard work? Working for accommodation could be the secret to your next affordable holiday.

Try doing farm work or picking fruit. Orchards often have free accommodation for workers.

Al Hall, a traveller living in New Zealand from Yorkshire in the UK swears by it – he even lived and worked on a dive boat in Great Barrier for a week once: “I basically helped them get cabins ready for guests, helped in the galley and did some cleaning. In return, I got meals, accommodation and to dive three times a day (with all their gear).”

Hall’s advice for people looking for similar experience is to follow backpacker Facebook groups and check with accommodation providers if they need a hand before arriving.

A sit, a swap, a couch, or a van – it’s up to you.

Just open your mind, get a little creative and your next holiday could be (almost) free.

WINTER 2021

|

JUNO 111

REGULARS

Book Reviews Reviewed by Sarah Ell

The Next Millionaire Next Door: Enduring Strategies for Building Wealth

Suck It Up, Princess

Thomas J. Stanley and Sarah Stanley Fallaw Rowman & Littlefield, $39

Natalie Sisson Tonawhai Press, $29.99

Who wants to be a millionaire? There are not many people who’d say, “Not me!” in answer to that question, even though today a million dollars will barely buy you a house in Auckland.

Natalie Sisson is an impressive woman — a Kiwi who has lived and worked all over the world, inspiring people to monetise their skills and earn what they’re worth.

But perhaps a more telling question is: who has the right qualities, habits, and mindset to become seriously wealthy, without winning Lotto or inheriting a stack of cash?

Her Suitcase Entrepreneur book has been a No.1 bestseller on Amazon and she’s a sought-after public speaker. But five years ago, she returned to New Zealand to live on a lifestyle property in Upper Hutt and turned her focus to encouraging women to aim for financial success and personal fulfilment.

American researcher Dr Thomas Stanley spent decades studying rich people to try to work out the successful paths to financial independence and wealth.

His 1996 book The Millionaire Next Door was a huge bestseller, and he was preparing a 20th-anniversary edition when he was tragically killed in a car accident in 2015.

His daughter Sarah, an industrial psychologist, finished the research for this updated book, which reveals how and why some people become wealthy while others struggle.

Things have changed since 1996. Today we’re bombarded by images of extreme spending on social media, and marketed to like never before. But the Stanleys’ research shows that some things haven’t changed.

Being frugal is still the cornerstone to becoming wealthy. Put simply, really rich people don’t ‘act rich’. They live within their means and don’t splash out (or go into debt) to buy flash cars, clothes, and jewellery, or compete with their friends.

As Sisson says, Suck It Up, Princess is “part memoir, part selfhelp guide, and part collection of random stories”.

How to build confidence The book aims to help women overcome engrained habits and a lack of confidence so they can go on to become successful in business and financially independent.

It covers letting go of negative thoughts and imposter syndrome, designing and creating the life you want to live, unleashing your ‘inner warrior princess’ and asking for what you want, learning to value yourself and charge what you’re worth, and positive relationships.

I like Sisson’s friendly, engaging writing style. She isn’t scared to share details of her own bumps along the road to success.

Being frugal is the key

The book’s more like a chat with a (super-successful, highenergy) girlfriend than a consultation with a professional, and it’s full of useful tips, practical strategies, and inspiration.

Unfortunately, if you’re hoping for a quick fix or a miracle cure, this book doesn’t give one. It shows that the only real way to amass significant wealth is make smart spending choices, commit to saving, and learn about investing. The good news is, that means almost anyone can do it — if they want it enough.

This is not a traditional ‘business’ book, and there are no stepby-step strategies for building wealth or running a business.

But Sisson’s mission is to empower women to earn $10,000 a month. It’s impossible to read it without a smile on your face and the feeling that girls can, in fact, do anything.

112 JUNO |

WINTER 2021

Making Makingpositive positivechoices choicesto to reach reachyour yoursavings savingsgoals goals What you’ll need to play: What you’ll need to play:

A dice and a counter for each person who’d like to play (you could borrow these from another board game or make your own).

A dice and a counter for each person who’d like to play (you could borrow these from another board game or make your own).

How to to play: How play:

Take turns to roll the dice, the number you roll is how many spaces you need to move your counter forward. Some of the Take turns to roll the dice, the number you roll is how many spaces you need to move your counter forward. Some of the landing spots have messages that will mean you can move forward again, or you have to move backward. First to reach landing spots have messages that will mean you can move forward again, or you have to move backward. First to reach theirtheir savings goalgoal at the finish is the winner! savings at the finish is the winner!

Start Start

you earned $20 $20 you earned doingdoing chores chores at home skip at home - skip forward 2 2 forward spacesspaces

working towards working towards your your savings goal goal savings

you spent $45 on$45 on you spent a toya you toy weren’t you weren’t sure sure you wanted - you wanted movemove backward backward 5 spaces 5 spaces

you earned $10 $10 you earned doingdoing a paper run run a paper - Skip-Forward Skip Forward 1 space1 space

you forgot to to you forgot put your money put your money somewhere saFe and somewhere saFe and loSt itloSt- move back back it - move 3 spaces 3 spaces

FiniSh FiniSh

you have reached you have reached your your savings goal goal savings

you had you fun had thinking fun thinking aboutabout waysways you can you can save save moneymoney - move- move to thetoFinish the Finish

you you savedsaved $25 that $25 that you you received for received for youryour birthday - skip- skip birthday forward 3 spaces forward 3 spaces

you earned $4 $4 you earned interest on your interest on your savings in the savings in bank the bank - move Forward - move Forward 1 space 1 space

you you helped a a helped neighbour with theirtheir neighbour with gardening and and theythey gardening gavegave you you $10 -$10move - move forward 1 space forward 1 space

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 how we are going as a nation.

Australia v New Zealand The strength of the housing market has put it in the sights of the Reserve Bank and the Government, with an array of initiatives to slow momentum, and more to come.

Housing is Issue No.1 for New Zealanders, says the IPSOS Issues Monitor. It’s the top concern in New Zealand (60 per cent), but it’s a concern for just 22 per cent of Australians. I’d say that wedge has a migration exodus to Australia written all over it – if we don’t tackle our housing problems.

We’ll all be watching auction clearance rates closely in the coming months to see if housing is slowing after the recent initiatives.

Annual growth figures will continue to show a strong market. The real story will be in the monthly movements in house prices, volumes, and average days to sell.

Where’s my container?

We’re feeling the impact of border control, particularly in tourism, without the usual flush of international tourists over summer. The trans-Tasman bubble will help but it’s no magic bullet.

Hi-ho, hi-ho, it’s off to work we go There are just under 200,000 people registered for the jobseeker benefit, but numbers have been easing.

Part of this is seasonal work, but the move is in the right direction. The GDP figures might be mixed, but the unemployment rate has fallen to 4.7 per cent, jobs ads are higher than pre-COVID and the IRD says tax revenue is better than expected.

114 JUNO |

WINTER 2021

And we’re hearing more and more about supply issues – getting imports in and exports out. Firms are finding it harder to get both skilled and unskilled labour.

Keeping up with demand is a common complaint, but okay, that’s a better problem than not enough demand.

Party like there’s no tomorrow Your house is worth more.

House prices across the country were up 2.7 per cent in March and 9.3 per cent in the three months ended March. Over the year, the increase was 24 per cent, with most regions showing 20 per cent-plus annual increases.

The number of houses sold was up 31.2 per cent, compared to the same month a year ago.

MARKET INSIGHTS

this back. But the fear of some sort of rent freeze or a cap on rents may encourage landlords to lift rents while they can.

Rent lament Watch the rental figures closely.

Government initiatives will slow housing, but the real battleground for many is what happens to rents, which are a big living expense for many.

This would be a perfect example of the law of unintended consequences, and bad news for the very groups the government’s trying to help.

Landlords are facing higher costs, like interest soon no longer being deductible.

The temptation is to pass these costs on.

Rents in the regions are rising faster than in Auckland. That gives us a hint of where the real housing shortages are.

What tenants can afford to pay will hold

Low interest rates linger Patience: That’s the mantra from the Reserve Bank, believing it will take time to achieve its employment and inflation objectives. That means low interest rates for a very long time.

Pack a bag The annual migration gain – people coming in – dropped to 17,400 at the end of February.

It’ll drop below 10,000 in the March figures.

Migration has dropped from 5,000 a month to just 700 a month. That means less demand for houses.

A record 41,000 new homes have been consented in the past year. We still have housing shortages, but this is a big up-tick.

Opening the trans-Tasman bubble might help tourism, but eyes are on whether Kiwis decide to jump across the ditch. Australian firms also can’t get skilled staff.

We’re hoarding money Firms are being slugged by rising costs.

ANZ’s Business Outlook survey shows firms are facing huge cost pressures and they plan to pass on price rises in a way we haven’t seen for decades.

How much they can do so will be a key issue shaping the path of inflation over the coming year, and another factor is how long the Reserve Bank can be patient.

After undershooting their inflation objective for a long time, a blip in inflation above 2 per cent will be looked through, as long as it’s not just a blip. And we won’t know the answer to that this year.

Low short-term interest rates are one of the factors holding borrowing rates down.

Bank funding costs have also fallen, because more people are hoarding money in transaction and savings accounts (for basically zero interest) with less in term deposit accounts.

That switch will unwind at some stage, meaning we need to be alert to the potential for borrowing rates to rise faster than wholesale interest rates or the Official Cash rate.

But unwinding it will need a jump in deposit rates above the rate of inflation, and for money in transaction accounts to be properly put to work.

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.

WINTER 2021

|

JUNO 115

Correct as at 6 May 2021.

Slug-flation

Snapshot We take a look at some of the events around the world affecting the global economy. From the Americas, through Europe, and then Asia, find out the latest from around the globe this quarter.

Britain

US Lumber hits a record price, soaring more than 250 per cent and adding more than US$24,000 to the average price of a single-family American home.

Prime Minister Boris Johnson has announced a new £1 billion trade and investment deal from India into the UK, which is expected to generate 6000 jobs.

Colombia There’s bloodshed on tax-reform in Cali, with the United Nations accusing Colombia’s police of using excessive force.

116 JUNO |

WINTER 2021

Spain The conservative leader of the regional district of Madrid, Isabel Diaz Ayuso, has won a resounding victory after a bitter re-election battle.

She’s popular because of her relaxed approach to COVID-19 restrictions.

MARKET INSIGHTS

Middle East Almost 4000 families have been displaced in Yemen after flooding has caused severe large-scale damage to homes. Many of these families have already been displaced by the war between the government and rebel Houthi movement.

Japan Olympic officials have revealed their plans to hold the Olympics in Tokyo this July 2021 despite Japan’s growing doubts and lack of capacity in hospitals. Organisers may be forced to ban fans and stage a ‘made for TV’ Olympics.

Afghanistan

Nigeria’s parliament has asked the head of state to declare a state of emergency amid calls for President Muhammadu Buhari to be stood down.

However, he’s backed by the Nigerian military.

Correct at 7 May 2021.

Nigeria

The US and UK have announced they are withdrawing their remaining 4000 troops from Afghanistan

by September 11 this year.

It’s been 20 years since Al-Qaida’s 9/11 attacks on America.

WINTER 2021

|

JUNO 117

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

Why Bitcoin is Outstripping All Other Assets Are you intrigued by cryptocurrencies, but don’t really understand them?

Mark Wong from Altcoin Ignition explains why Bitcoin has value, what Ethereum is, and suggests some altcoins to watch.

For 11 years on the trot now, Bitcoin (BTC) has been embarrassing its naysayers.

money as they needed, adding to the supply but without adding additional value.

“It’s not backed by anything,” says a prominent expert on traditional markets.

“It’s a bubble and it will go to zero dollars,” says another.

This constant debasing of fiat money is known as ‘inflation’.

To understand why Bitcoin continues to soar in price, you first have to understand what ‘money’ is, at its core.

People give Bitcoin its value by investing their own assets into it.

Money is a way to transfer value from one person to another, using something other than the items of exchange themselves.

Traditionally, money itself was only worth what backed it. Once upon a time this was gold.

So, money was essentially an IOU on printed paper that represented ‘x’ amount of gold. This was known as ‘the gold standard’.

Bitcoin is different because its value comes from its users.

So, if we think of fiat money as being controlled by the government with its value being decided by the government, then Bitcoin is controlled by its users, with its value being decided by its users.

One of the key points of difference is the control that governments have over fiat money.

Bitcoin is decentralised. It cannot be shut down, no person or organisation can decide its value, and it’s almost impossible to hack.

Bitcoin is that it’s deflationary.

To understand this, we must cover how Bitcoin enters circulation.

The Bitcoin supply increases through a predetermined protocol in which ‘miners’ race to solve a complex hashing puzzle.

There’s a new puzzle every 10 minutes and a new block is added to the Bitcoin blockchain.

Think of it like a ledger.

The miner who solves this problem gets to add a fixed amount of Bitcoin to the ledger and do with it as they please.

The more powerful the miners’ computing equipment, the more likely they are to win – and the more Bitcoin they will mine.

There are only 21 million Bitcoins and by 2140, all the world’s Bitcoin will have been mined.

But by 1973, the governments of the world had abandoned the gold standard, instead issuing a government guarantee to give money its value.

What is blockchain?

Bitcoin is not just a currency; it’s only the first application of the underlying technology known as ‘blockchain’.

In a planned strategy, every four years, the block reward for the miners is halved.

This paper money made legal by government decree is known as ‘fiat’ money and is not backed by anything physical.

This has allowed governments to print

Blockchain is a system of ‘blocks’ of computer code that identify transactions and their owners.

The reward for miners started at 50BTC in 2009 and after many ‘halving’ events, the 2020 halving brought that down to 6.25BTC. The halving is always followed by

Perhaps the most important feature of

This event is part of Bitcoin’s protocol and can’t be stopped.

Join the community

ADVERTORIAL

a run on the cryptocurrency, where Bitcoin leaps in value.

It’s also estimated that up to 20 per cent of Bitcoins have been lost.

So, let’s recap.

We have a secure, digital, and deflationary asset in hot demand as people look to hedge themselves against a financial system that is centralised, inflationary, and overencumbered with debt.

from contracts.

It’s important to note that Ethereum is a blockchain and not a currency.

Mark's picks for winter

The currency traded on exchanges is called ‘ether’ or ETH, but Ethereum is mainly used as being interchangeable.

1. XRP

Every time a user interacts with the Ethereum blockchain, they must pay a fee in ETH, creating a demand that gives ETH value.

The ‘banker’s coin’ narrative plays well with new investors.

Shrinking supply + demand = increasing value. That’s why Bitcoin has value.

What are Altcoins?

An altcoin is any coin that’s not Bitcoin.

What’s Ethereum?

Launched in July 2015, Ethereum is a blockchain that allows ‘smart contracts’.

These often see massive growth during bull markets and attract speculators who trade them for huge profits.

Think of this as a contract that’s programmable and, once programmed, can never be altered.

But beware, trading altcoins is a high-risk high-reward game, and no one should ever invest money they can’t afford to lose.

It will execute its purpose and is completely rigid.

Any attempt to change the contract will leave a record of transaction on the blockchain, so it’s impossible to alter it without being detected.

The applications for this are endless because it takes out the element of trust

altcoinignition.io

This is true for all cryptocurrency investing, but even more so with altcoins.

Altcoin picks for the quarter Cryptocurrencies’ values change daily, so the value listed will be out of date by the time you read this, but we’ve supplied them for comparison purposes.

Price at May 7: US1.60 Market capitalisation: US$73.4 billion

Expect this to be a huge mover, as inexperienced money floods the market this quarter.

2. SOL Price at May 7: US$43.52 Market capitalisation: US$11.8 billion The Solana blockchain boasts superior processing speeds and scaling ability.

It’s undervalued – but not for much longer.

3. COIN Price at May 7: US$0.336766 Market capitalisation: US$27.4 million A new cross-chain decentralised exchange that partners with Coinbase for liquidity.

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

120 JUNO |

WINTER 2021

MARKET INSIGHTS

Share Market Lessons Investors have been on a rollercoaster ride in recent times. Chris Smith looks back over the 15 years CMC Markets has been in New Zealand and reflects on learnings.

Over the past 15 eventful years, I’ve seen markets experiencing extraordinary swings as historic and unprecedented developments drove the financial world.

When CMC Markets first opened its doors in Auckland in 2006, the New Zealand top 50 share market index was below 3,400 points, and a NZ dollar cost 63 US cents.

The Official Cash Rate (OCR) set by the Reserve Bank of New Zealand stood at a level high by today’s standards, at 7.25 per cent.

Today, the NZX has risen to 12,700 and the Kiwi dollar is at 73c versus the US dollar.

The Official Cash Rate has plummeted to 0.25 per cent.

What a lot has changed. Let’s look back and see some of things I’ve learned from it.

YouTube was a newbie Fifteen years ago, YouTube was the hot new player on the internet, later selling to Google for US$1.65 billion dollars, a figure it makes in revenue each month in 2021.

WINTER 2021

|

JUNO 121

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

Social networking service Twitter launched at almost the same time as CMC introduced New Zealand’s first mobile trading platform in 2006.

I saw two major global crises over this time and many mini and scary corrections as market moves amplified in speed as the years passed.

The Global Financial Crisis (GFC) struck in 2007-09 and then the COVID-19 rout in March last year blindsided investors.

I recall talking about yet another bank that was almost out of business being saved most Monday mornings on ASB breakfast television.

Most have survived and prospered since, with huge government support.

Both crises saw big falls in the values of Kiwis’ portfolios, but each event unfolded differently.

•

The GFC wiped 45 per cent off the value of the NZX 50 index and took 17 painful months to unfold. The low was March 2009, when the S&P500 index hit around 666 (versus 4200 today).

122 JUNO |

WINTER 2021

•

The COVID-19 crisis last year was more savage, taking just a month to drag the share market 32 per cent lower.

Some lessons We can take two important lessons from these sharp market sell-downs.

The first is that higher market volatility is scary, and the speed of the corrections is getting shorter, so time to react needs to be faster, but it’s good news for traders who prefer volatility to create opportunities in short term.

The share market continues to be, and always will be, very forward-looking, which frustrates watchers of the markets.

The market is also very irrational at times and investors should always remind themselves of Benjamin Graham’s famous reference of the market as ‘Mr Market’, happy or angry on different days.

Over both these crises, having access to shorting or hedging was important – as was cutting out the noise in markets.

Investors are easily influenced by media and emotions, so I’d encourage you to build a strong resilience to the ups and downs

of the market, so you can make clearheaded decisions and not rely on hope as an investing strategy.

The good years And, of course, over this time there were many good years for Kiwi investors and traders.

Action from the Reserve Bank of New Zealand, as well as central banks around the globe, supported shares and bonds, and created other new asset classes. This played a big role in lifting market returns and avoiding recessions.

Lower interest rates and yield-chasing were key factors helping the NZX 50 hit its all-time high in January this year, above 13,400.

Local investors who stayed positive and optimistic outperformed in market tumbles, and shared in the gains as markets and stock prices recovered.

Many of CMC’s Kiwi clients have traded the big swings in value in the New Zealand dollar over the past 15 years.

The Kiwi dollar has swung between a high of 88 US cents, and a low of US 50 cents.

MARKET INSIGHTS

But overall, the New Zealand dollar stays in a tight band for our exporters and importers.

The strength of the New Zealand economy meant that twice the Kiwi dollar has been close to equal with the Australian dollar.

It’s pulled back from 99 Australian cents both times, but it’s worth bearing in mind that a lower local currency gives Kiwi businesses a leg-up on our trans-Tasman neighbours.

What to expect now The financial markets are in full ‘hopism’ and recovery mode after an unprecedented period of global disruption and stimulus.

Major tech firms are continuing to post record numbers and benefit from the global digitalisation in business and consumer behaviours. Vaccines are providing hope for the hardest-hit businesses, and many will come out of the COVID period stronger than before.

We’re in the middle of the greatest economic experiment ever attempted, but we have many reasons to be hopeful.

Debt levels are always at record levels since the GFC and interest rates continue to be very accommodative, so working out how it can return to pre-2008 norms is hard to imagine.

Working out what the new normal will be going forward is near-impossible, but many will try to predict it.

Importantly, everyone has different investment horizons and goals. The market has more than 20,000 companies listed and caters for all types of investors.

Market corrections will continue to be reported as headline news, and technology will widen the global investment universe for all New Zealanders.

I feel that New Zealand’s strength and diversity, from our people and geography to our institutions, mean this country is in a good position to face the ups and downs of the global financial markets and being internationally diversified has never been easier.

For one, I’m looking forward to the next 15 years and seeing what the next major innovations emerge for investors and traders.

CMC’s commitment The CMC Markets New Zealand team has forged strong relationships with local communities over the 15 years it’s been operating in this country.

It’s been a long-standing sponsor of Variety – The Children’s Charity.

Its commitment to making the financial markets more accessible and financial education meant CMC Markets has supported University Trading Challenges throughout New Zealand for many years.

This initiative has given hundreds of university students the chance to take their trading knowledge out of the lecture theatre and apply it in the real world.

More recently, CMC Markets NZ has also stepped on board as a major partner of the Blues Super Rugby team. www.cmcmarkets.co.nz

WINTER 2021

|

JUNO 123

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

The Big Bounce Back The Covid-19 recession will go down as one of the deepest in history, but the world economy should make a swift and complete recovery, says our man in Europe, Andrew Kenningham, of Capital Economics.

The downturn caused by the pandemic has been the worst since the Second World War. The global economy contracted by more than 3 per cent last year – a much bigger fall than the half a per cent decline after the 2009 global financial crisis (GFC). And the damage to many European and some emerging economies has been much bigger.

The good news, however, is that in many countries the rebound has been swift.

A quick rebound The US economy looks set to expand by more than 6 per cent this year and growth in many other countries (including Australia and New Zealand) should be almost as strong.

Indeed, the Chinese economy is already running above its pre-pandemic level. Of course, China is an exception because, despite being the first country affected, it was not as badly hit as many.

124 JUNO |

WINTER 2021

MARKET INSIGHTS

WINTER 2021

|

JUNO 125

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

The Chinese authorities brought the pandemic quickly under control and have kept it in abeyance since last summer.

But China is not alone. The US is likely to get back to its pre-pandemic level in the second quarter of this year and is now on track to go above the path it was on before the pandemic hit.

For Americans, it may soon seem as if the pandemic never happened. This is great news for countries which are a bit behind in their vaccination programmes.

Why it’ll be short There are several reasons why this recession should be short-lived: First, asset prices have generally remained quite high. Property prices 126 JUNO |

WINTER 2021

collapsing were the root cause of the 2009 sub-prime crisis, but this time they have risen. This has made households better off, on paper at least, and has helped banks to avoid serious financial problems.

Second, household incomes have held up well. During a run-of-the-mill recession, people who lose their jobs also lose much of their income and are forced to slash their spending – and this in turn causes the recession to deepen. But this time around, governments have helped by setting up generous job support schemes and other welfare payments.

Third, there should not be much longterm scarring in the labour market.

Most of the people who lost their jobs due to Covid regulations will get them back

as health restrictions are lifted. Bars and restaurants will be re-opened, and airlines will start to fly again. This is a big contrast with the experience after 2009 or back in the 1980s, when unemployment remained high for years.

And fourth, interest rates have fallen.

Partly because of this, there has been no credit crunch – another feature of many previous recessions.

Even aside from the job support schemes, policymakers have been far more generous in supporting the economy than they have usually been in the past.

Politicians had few qualms about spending money to help households and companies weather the storm, because the pandemic was clearly outside their control.

MARKET INSIGHTS

The pandemic has spurred investment in digital technology, so there will be efficiency gains from increased use of IT in areas ranging from education and medicine to business services.

However, set against these concerns, there have already been some positive economic side-effects of the pandemic.

In America, both the Trump and Biden administrations boosted the US government deficits for their own (very different) political reasons. There’s little reason to fear a repeat of the financial austerity we saw after the GFC.

Not all these benefits will boost economic activity: they may, for example, lead to increased leisure time, if people spend less time commuting.

But some of it will increase business efficiency and measured GDP.

What about the long term?

The rebound looks set to be swift, but this says little about the longer outlook. History is littered with examples of recessions which have been followed by long periods of weak economic growth.

Certainly, we’re not out of the woods yet, because much of the world is still in the

grip of the pandemic, witness the latest distressing news from India.

Governments with fewer resources won’t be able to vaccinate the bulk of their populations for a long while to come. And even in richer countries, there’s the threat of new virus variants which could escape the vaccine.

Moreover, some investment will already have been lost due to the crisis – think airlines and office space, for a start.

And if household confidence has been shaken, spending may be subdued for a while.

This time it’s different The pandemic has spurred investment in digital technology, so there will be efficiency gains from increased use of IT in areas ranging from education and medicine to business services.

So, this recession could really be different from previous ones.

At a minimum, the economic fallout from the pandemic is smaller than many people assume. And in practice, the recession could even be followed by faster economic growth than we would have seen.

Are you invested in global growth sectors?

M I K E TAY L O R Founder & CEO

The year 2020 was big for global markets, and 2021 shows no sign of slowing down. With a Covid-19 vaccine rollout picking up momentum globally, many companies are adapting to, and thriving in, the new normal.

New areas tipped for growth bring investment opportunities for Pie. One example is bike companies, struggling to keep up with global demand. E-commerce stores selling home furnishings and decor have taken off too – a product of the pandemic. Global factory automation companies are thriving as well, as demand for innovation and efficiency soars. Better automation helps save energy too.

Our active management strategy means we can be nimble and take advantage of opportunities in growth companies and sectors abroad, in this ever-changing pandemic environment. This is further supported by our Pie research team on the ground in London.

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

Pie Global Growth + Three excellent fund options Invest globally through quality companies hand-picked by the investment team. + Long-term capital growth Pie’s global funds aim to deliver long-term capital growth. Diversify your investments through exposure to global opportunities. + An equities research team in London Our specialist researchers find opportunities in global sectors, with strong connections in the UK, Europe and further afield. Their strength in detailed analysis helps select strong companies. + Includes opportunities which can be difficult for retail investors to access Expand your portfolio through quality companies and sectors that can be difficult to access for retail investors. Pie’s global funds give this exciting investment opportunity.

Boutique. Bespoke. For you.

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

PIEFUNDS.CO.NZ

P I E F U N D S . C O . N Z Information is current as at May 2021. Pie Funds Management Limited is the manager of the funds in the Pie Funds Management Scheme. Any advice is given by Pie Funds Management Limited and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Pie Funds Management Scheme investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our product disclosure statement, please visit www.piefunds.co.nz. Please let us know if you would like a hard copy of this disclosure information. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary.

T H E

THE ORIGINAL THRILL With power that cannot be contained, the BMW M3 delivers an unmatched level of exhilaration. Get reacquainted with the legend, the BMW M3 Sedan.

Visit Continental Cars BMW to find out more.

Continental Cars BMW Auckland 45 - 65 Wairau Road, North Shore. (09) 488 2000. ccbmwauckland.co.nz Continental Cars BMW Wellington 138 Hutt Road, Kaiwharawhara. (04) 499 9030. ccbmwwellington.co.nz