Guarantee - to promise something, or make something certain - assures a specific outcome.
Security - the state or feeling of being safe and protected, that something of value will not be taken away.
Nothing is guaranteed. Never was, and never will be. And nothing is secure either.
What about investments? How secure are they?
Do you believe a bank is a safe place for all your money? Don’t! Some failed in the GFC.
What about a house somewhere? There are major fault lines running through the length of New Zealand - we just don't know what could happen. Queenstown? A little shake in the Southern Alps could create a rock slide, with a resulting tsunami down the lake into Queenstown (or Wanaka).
Property? The boom in Auckland could result in a bust. If you have borrowed a lot, you could lose a lot.
Like I said, security does not exist.
You can do the next best thing with these two steps:
- Diversify your assets
- Pay attention to risk management
Many old pilots will tell you about Murphy’s law - “What can go wrong will go wrong”. Not entirely true. If and when you get organised, and do a bit of (pre-flight) forward planning, less things seem to go wrong and you are much less likely to get cleaned out entirely.
Make sure you have all the appropriate life insurances. Medical insurance? Income replacement insurance? House insurance? Contents insurance? Car insurance?
Remember to review them all annually to ensure you are not wasting money.
Wills and EPA’s
Do you have a will? Is it up to date? Are your trustees quite a lot younger than you? They should be.
Make sure your spouse has a will too. Remember you may be the one left to sort it all out and tidy it up. That can be hard work if there is no will, or it is out of date.
Enduring powers of attorney should also be made. This is someone to run your affairs, or for you to run your spouses affairs if one of you is out of action due to accident or illness.
How did I answer my client?
He was asking if I can guarantee him financial (investment) security? No, I can’t but I can do the next best thing. To sum up:
- Diversify widely, on and offshore
- Buy quality investments
- Average your way in
- Get good professional advice
He will do nicely in good years. He will survive the bad years. He won’t really have to worry too much about NZ milk prices; the NZ dollar; ISIS; oil prices; what happens in Ekatahuna; Timbuktu, New York; or anywhere else.
Diversification is his friend - and yours - and it’s virtually free.
Supplied by Alan Clarke, financial & retirement adviser, & author. He also writes regular articles for the media and on line.
His second book “The Great NZ Work, Money & Retirement Puzzle” is now available.
You can buy it on line at www.acfs.co.nz
Alan is an independent authorised financial adviser (AFA) FSP26532
His disclosure statement is available on request and free of charge