Investment Report Q3/Q4 2017

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Retirees' strategies for coping with negative markets

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In last month’s column, I discussed the impact that falling markets can have on those clients who are in the saving phase of their lives. I concluded, somewhat surprisingly, that for clients who are disciplined and invest in a certain way, negative markets can help build wealth. Although this conclusion is valid for half of the population (i.e. those in the wealth accumulation phase of their lives), what about those clients who are retired and looking to receive a sustainable level of drawings to help fund their living costs? The simple answer is that for retired people, a falling market environment has to be endured rather than benefited from. It is a time when the way a portfolio is ‘engineered’ will become a critical determinant of whether the strategy will be able to sustain the same level of drawings when markets turn negative. Don’t cut down half-grown trees. For retired clients, the way in which the portfolio is constructed has a lot in common with a diversified farming...
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Investing in a high inflation environment

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It was back in August of last year that I first referenced the growing inflation risk in New Zealand and labelled it the 'silent thief'. It is now official; the silent thief has arrived. Stats NZ 1 have confirmed that the Consumer Price Index (CPI) increased 5.9 percent for the 12-month period ended December 2021. This is the highest rate experienced over the last 30 years and anecdotal evidence suggests that many supply chain pressures are yet to peak. Offshore, the situation is similar with the United States CPI climbing to 7% in 2021. Like New Zealand, this is also a multi-decade high; in fact, it's the highest rate since June 1982. And perhaps more telling is that the United States central bank, the Federal Reserve, is no longer referring to inflation as 'transitory' but acknowledging the potential for it to be 'persistent'. OK, so no big surprise here; anyone who has been supermarket shopping over the last six months is well aware of this. At curr...
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The best time to invest is generally right now.

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The Global Financial Crisis was so dramatic that it still looms large in the minds of many investors, almost as if it had only just happened. Anecdotally, there are investors with their money still waiting in the bank for a sign that the world is a safe place and that they can invest more widely. But while they have been waiting the Dow Jones Industrial Average in the United States, as an example, has grown around 300% since February 2007. More if dividends were reinvested. The 1987 share market crash had a similar impact on the psyche of New Zealanders. 30 years later it still comes up occasionally in meetings as a reason not to invest in shares. And yet the market has gone up by as much as 1,000% since. And the GFC has been added as a new reason – despite the NZX having returned approximately 350% since February 2009. Fear can be good. It's designed to keep us safe. We don’t even have to have direct experience - the stories of others can also affect us. And so it is with mar...
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