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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Goals based investing – a new way of thinking.

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In a previous article, I explained the power of compounding investment returns. The article highlighted the impressive synergies created by the combined effects of; starting early, maintaining regular contributions and reinvesting your returns.  It all sounds so simple. But I guess one of life’s truisms is; “that which is simple is not necessarily easy”. This disconnect between knowledge and action has caused some advisers and fund managers to rethink the way they provide advice to clients and construct investment portfolios.  It appears that for some clients the traditional diversified portfolio approach is a barrier to success as that portfolio can seem far removed from the client’s life. In the real world our financial goals are driven by the things that we want to achieve. They are fluid in nature and many in number. Accordingly they have different time frames and can even compete with one another.  A traditional diversified portfolio, which is constructed...
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