Share markets were generally negative in September, which caused a friend of my teenage son, upon checking his KiwiSaver balance, to conclude that his provider was stealing his money. He could see no other reason why his balance would have decreased. We can smile at the young man’s assumption. After all, market movements, up and down, are a normal event, bearing in mind that they go up more often than they go down. But his assumption highlights the more serious issue of our financial literacy. And that if there are knowledge gaps, whether investors are costing themselves returns unnecessarily. It has been reported that up to 50,000 KiwiSaver investors moved $1.4 billion into cash and conservative funds in March 2020 as the COVID-19 pandemic took hold. Some will have been new funds being invested, but much more will have been the result of investors reacting to the pandemic and moving to a more conservative allocation fearing further losses if they remained in their more growth-o...

Over the last decade the performance of the United States share market has significantly overshadowed other major markets. This is in large part due to the success of the technology related companies which have made up a larger percentage of the market in the United States compared to other markets. However, this may not be the case over the next decade as other markets around the world have some potential. One candidate for outperformance is the Chinese share market. The Chinese government is making significant moves to migrate household assets, predominantly held in real estate, into financial assets such as shares. During the last week of October, the Chinese Communist Party will meet to set the blueprint for the five-year plan for 2021-2025. The message from this meeting will be that the external environment is likely to get more challenging for China in the next five years. On the economic front, global growth is expected to be lower in the coming years and trade protectio...

The announcement on the 26th of August that the Bonus Bonds Scheme would immediately stop taking new investments and completely close on 31st October came as a surprise for many retail investors. The scheme, which was established by the Government to encourage savings in 1970, was originally run as part of the Post Office. In 1989, when ANZ Bank purchased the Post Bank, the Bonus Bonds operation moved into private ownership. As at 31st of March this year , there were just over 3.12 billion of $1 bonds on issue. That works out at around $625 for every New Zealander. The closure will be a significant financial event for many people. Based on the current prize pool, and the number of bonds on issue , the average return worked out at 1.09% p.a. However, the key feature of Bonus Bonds is that this return is not distributed equally, with random chance being the arbitrator of your return. The holder of a $20 bond had a 1 in 160 million chance of winning a 1-million-dollar pri...

While the pandemic is killing scores of businesses that depend on office workers, it is also making way for start-ups and titans alike to conquer a new industry of powering our remote lives. In our Investment Insight, 25 September 2020 | Digitising the global economy , we wrote that new technology and changing consumer expectations are shattering the status quo. Our consumer choices are also influencing the data used to assess the economy. There has been a lot of discussion recently that the risk of inflation is misplaced. This concern is not without validity, with delays in New Zealand opening its borders and the United States showing signs of fatigue without more stimulus from the government. However, the gap between everyday experience and the printed inflation rate is massive. Essentially, the price of the stuff we are buying is rising fast, while the stuff we are no longer buying has been falling, but still counts in how inflation is calculated. According to an articl...

In September, we described how NZ Funds was successful in mitigating the downside as markets fell and capturing the upside as markets recovered. We also highlighted how growth-orientated and income-orientated investors were up strongly year to date versus the New Zealand share market. This situation continues, and despite the volatility in financial markets, clients’ portfolios are well positioned for what we believe will be a strong economic recovery. In our view, this is only the beginning of a new bull market for shares. While the upward trajectory may pause as we navigate the United States and New Zealand elections, once the market digests these events, we believe the second phase of the market recovery will commence, driving growth assets higher. Think long term - now is the time to invest Those who invested funds in March and April are now sitting on a handsome capital gain as global share markets have rebounded strongly due to Government intervention. We believe a simil...

New Zealand’s financial future lies with entrepreneurs, not government “Kiwis are clueless, careless and deluded about money and retirement savings.” This is how our media interpreted the Commission for Financial Capability’s recent financial survey. For many New Zealanders who work in the financial advice industry, such articles make for depressing reading, and are all too common. There is no disputing however that New Zealand has fallen behind financially. We could have adopted KiwiSaver in 1992 but chose not to. Right now, saving for retirement is compulsory in Australia at 9.5%, but only optional in New Zealand at 6% (or less). The average Australian has around $145,000 in their Superannuation Scheme, while the average KiwiSaver member has around $20,000. This represents the opportunity of a lifetime. One of the more remarkable pieces of news this year was the story that Space-X had successfully sent astronauts into space. While that has been done before, this time was d...

The September 2001 attack on the World Trade Centre in the United States dramatically changed the travel landscape. Not only were people scared to travel, but they were also deterred by the stricter security requirements and long queues at airports. International travel At that time, it seemed that the travel industry had experienced massive structural change. It was difficult to envisage the general public wanting to travel by air with the same frequency and nonchalance. However, as we now know, people’s appetite for international air travel only took a couple of years to return to the prior levels and subsequently went from strength to strength. Airlines are a sector that has been significantly impacted by the COVID-19 pandemic. However, despite the challenges faced by the industry this time around, there is generally a degree of confidence that travellers will return once there is a vaccine. So, while the share prices of airlines remain very depressed, investors are eyeing...