A key task for a Financial Planner is to help clients with investment discipline. The discipline to stick with a strategy when the only thing wrong with it is that markets aren’t providing the positive returns wanted. Studies have clearly demonstrated the propensity for investors to lock in negative or inferior returns because short term volatility encourages them that they need to act. Perhaps to escape back to cash in case markets get worse, or alternatively to chase an alternative investment choice which isn’t currently experiencing negative returns. Not yet. In reality I don’t need a formal study to know that this happens – there is plenty of anecdotal evidence in our own community to support the proposition. Ultimately it’s an outcome of being human and an inherent difficulty in staying committed to the longer term. We react to what is in front of us. Which is ironic when likely the financial plan has a focus on accumulating to age 65 (lets assume that is several years or mor...

I generally like to start the year by encouraging readers to review and refresh their financial goals for the coming year – but I have been distracted. In a recent ODT article (25/1/2020) titled 'Ready for anything – preparing for the apocalypse' , Bruce Munro laid out numerous doomsday scenarios that could potentially beset us; economic, political, natural, environmental, military, technological, social, climatic and extra-terrestrial. As Bruce observed, for each of these risks “there is someone who will tell you that it is inevitable, imminent, inescapable ... and that you should be preparing for it." And this is before I started worrying about the Coronavirus. The question I have been asking myself is – why do we allow matters that we have no or very little control over have such an influence on our behaviour? And when saying 'influence on our behaviour' I really mean they cause us to choose the path of inertia and opt to do nothing. To make matters worse ...

FMA issues request for information Late last year, KiwiSaver managers received a request for detailed financial information on the investment management of the KiwiSaver funds that they are responsible for. Initially this request came from a private organisation, but was followed up shortly afterwards by a more formal email from the Financial Markets Authority (FMA). The purpose of the exercise? To determine how active each KiwiSaver manager is. Is active management now a crime? The short answer is no. Worldwide, the investment management industry has long debated the merits of active management (managers actively altering asset allocation, managers and securities) verses passive management (a more static mix of assets, managers and securities, the allocations of which are determined by an index). Neither form of asset management is wrong and, in NZ Funds’ view, both have merit. What about closet indexing? Again the short answer is no. Closet indexing is the practice o...