I know, there are lots of “if we had” stories out there, but perhaps we actually can turn downturns into something better than just plain old gloom – read on.
What country are we talking about ?
Where is our money and assets ? Most Kiwis have 80% or more of their money in NZ.
Diversification matters - a lot.
Most KiwiSaver funds are well diversified on and offshore, but it will take time before this will make much difference to the average Kiwi’s offshore holdings.
How is NZ looking ?
· Our biggest export, dairy produce, is down 45% since February.
· The farm gate price for many famers is getting close to marginal.
· Auckland and Christchurch property prices are at crazy levels.
· Excess property borrowings could indirectly damage the economy.
· The Christchurch rebuild will come to an end.
· Log prices have fallen over 30%.
· Low interest rates will gradually rise, and eventually could crush the housing market.
· The RBNZ will find it very hard to engineer a soft landing for the NZ economy.
· If the NZ$ falls too much, it could be very damaging to the economy.
There are some good economic stories offshore, data is pointing to a recovery in the US, and lots of encouraging signs in many countries. In fact the world seems to be going quite well despite all the doomsayers.
Draft Checklist -(caution still under development)
· Look at your asset base – is it diversified by types of assets, and geographically as well?
· Are you nearing the time when you will need income from your assets ?
· Do you have liquidity - some investments that can quickly be tuned into cash ?
· Is the bulk of your money in one asset?
· Are all your assets in NZ ?
· Listen to people who have a lot to say – if they are buying houses, beach properties, and shares, and bragging about big gains, maybe the top of a boom is approaching
· Listen to the economists , but then apply some common sense.
· Watch house prices - if they have reached insane levels, maybe reduce/downsize/sell.
· If interest rates are rising, it will usually be the RBNZ trying to slow the economy (maybe a boom) down.
· Watch our main export prices. If they fall a lot, the economy might slow or even stop.
· Do the opposite to everyone else – if they are buying, start selling & vice versa.
· Ignore populist news that “we are doing better than Ozzie” or USA “bashing”.
· Learn from your mistakes and history - e.g. what would have worked in 2007.
· Always rebalance your shares - paper profits come and go.
· Only ever buy high quality bonds.
· Learn and underrated diversification.
· Learn about hedgding into the NZ$ , and what it means.
· If you are retired and are going to spend a lot of time offshore, put more money offshore
· Don’t over-react – replace fear and greed with a rational approach.
· Make a plan and carry it out
Readers are welcome to email me with their comments &r additions to such a checklist. More next week.
Supplied by Alan Clarke, financial & retirement adviser, & author. He also writes regular articles for the media and on line.
Alan is an independent authorised financial adviser (AFA) FSP26532
His disclosure statement is available on request and free of charge.