Asset class funds - the best options we can find.
Bank - an organisation that lends you an umbrella when the sun is shining, but wants it back when it starts to rain.
Bank deposit - a place to invest where you often lose money slowly - after inflation and tax.
Collectables - investment paintings and antiques. If you have the skill, why not? But perhaps these should only be 10% of your overall assets since they are not always easy to sell at a good price.
Communication – is what is being said true ? What’s in it for the person who wants to sell you something ? Is it good for you, or for them ?
Diversification - often lacking by many Kiwis who already have a house, and sometimes two or three. In fact most Kiwis have about 80% or more of their total assets in their houses.
Equities – technical name for shares – unnecessary jargon.
Discipline – a tool investors should use, instead of fear and greed.
Doubt - if in doubt, do half. Opposite of jumping in, boots and all.
Fear - associated with shares – my Uncle Joe lost everything in the ’87 crash. Probably because he had all his money in NZ shares, which is 0.04% of world markets. In 1987 offshore markets recovered very quickly.
Forecasting – a failed science, but people in the investment industry will still keep trying to convince you they can.
"Those who have knowledge, don't predict. Those who predict, don't have knowledge. " - Lao Tzu
Gold - glittery stuff that often attracts gamblers and speculators. However you might like to have 10% of your assets in gold if you feel the world could fall apart.
Greed - the cause of many investment losses. “I want what’s hot” (already expensive).
Half - If in doubt, do half. That applies to your daughters 250 guest wedding in Hawaii too.
House - a box to live in that costs far too much in many NZ cities, often built over an unknown fault line. Kiwis love them.
Index funds – holds all the shares in an index, like the NZX50 which holds shares in the 50 biggest companies in NZ. The S & P 500 does something similar in the USA. Costs are as low as 0.1% pa. since no one is stock picking or forecasting.
Junk bonds – can mean big well known names who want to borrow your money (wolves in sheep’s clothing).
Logic - emotion says buy something hot. Logic says invest a mix of bonds and shares, on and offshore.
Managed funds – usually run by a team of highly paid managers and analysts who think they can pick stocks and forecast accurately. Costs can be pretty high.
Rebalancing - If you are out of balance, you might fall over. Investments are the same.
Retirement village – nice place to live when you get older, but beware, the cost to exit can be prohibitive ( one way street ?). If your spouse dies and you get a new partner, you might want to move again.
Sharebroker - helps you buy and sell shares. Perhaps fun to dabble in a few NZ and Ozzie shares, but you really need to diversify over thousands.
Shares - NZ name for stocks and equities. Over the last 85 years, a global mix of large and small company shares has averaged about 11% pa. Diversify and give them time.
Stocks - American name for shares, the Yanks have to be different
Stock picking - something no one can do successfully, year in, year out, but they will tell you they can, and they can be very persuasive.
Time – “the stock market takes money from the impatient, and gives it to the patient” - Warren Buffett. Same for property.
Village - maybe pillage. Some say retirement village operators are “farming the elderly.”
Walking - If you can’t find the right advice easily, don’t worry - walk away and keep looking.
Supplied by Alan Clarke, financial & retirement adviser, & author. He also writes regular articles for the media & on line.
His second book “The Great NZ Work, Money & Retirement Puzzle” is now available.
Order 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.