Rob Everett, CEO of Financial Markets Authority (FMA), says: In New Zealand, many people now offer their thoughts and perspectives on financial matters, and some have built strong followings on social media. But sometimes talking about money or investing can cross over into providing financial advice.
Good and getting better
Why would the couple in their 50’s have such a different outlook to the man in his 30’s? It’s hard to be a successful investor unless you’re an optimist. Firstly, if everyone does well, you’re likely to do better as an investor.
The lesser-known link between investment and return
"Investment" actually has two interrelated meanings: a physical investment (machinery, building, cars etc.) and financial investment (stocks and bonds), which lays claim on physical investment and the income (aka "return") it generates. So what is the lesser-known link between investment and return? Productivity.
Falling out of fashion
One of the main reasons people invest in term deposits over other investment assets is for safety. But not many realise the risky fact that New Zealand does not currently have a deposit insurance scheme. A long-standing Reserve Bank’s policy is aimed at allowing a distressed bank to be kept open for business while placing the cost of a bank failure primarily on the bank's shareholders and creditors, rather than the taxpayer.
Investing in fashionable technologies
Ever stopped to wonder why you’re using a particular new word or phrase? Or maybe you’re sitting in the back of some strange person’s Toyota, they’re driving you to some strange person’s house where you’re staying the night in their guest bedroom. How did that happen?
Bonus Bonds: One birde in the hande is better
Questions are coming in; folks are weighing up their options and wanting to know what is the best investment vehicle out there to put their Bonus Bonds money in as the ANZ's 50-year-old scheme will be wound up with money returned to bondholders.
Vices and virtues | Covid-19 Special Focus
I often hear stories about how people mistake their knowledge, expertise or success in one area for giving them some insight into investing or investment markets. No one should ever make the mistake of believing their brilliance in one area will equal brilliance elsewhere.
Investing FOMO | Covid-19 Special Focus
Investing FOMO is when you watch a share price soar to new highs, and you realise you missed out on the opportunity. You might spend the next hours, days, weeks thinking about what could have been the returns. This type of self-talk and do-it-yourself financial planning is damaging to your mental health and retirement goals.
How to invest during a downturn | Covid-19 Special Focus
Over the past few weeks, we have been answering lots of money and market-related questions that members of our community have asked. Not surprisingly, a lot of the questions have had to do with the market volatility and how that can, or should, affect their investments.
First balance and then re-balance
Balance, and finding balance. It evokes pictures of rocks stacked upon each other at the beach. It’s something of an ongoing search for time-crunched people. How they can bring balance to various aspects of their lives?
Diversification a Great Luxury
New Zealanders are not keen on diversifying. NZX makes up 0.01% of the world’s share market capitalisation, but most New Zealand investor portfolios are overly weighted to the home market. In other words, a New Zealand investor with a strong home bias would have just a 7% allocation to technology, compared to approximately 16% in the global portfolios.
Make sure you have a 'fire drill' for your investment plan
An adviser once said he did not so much have people with investment problems as he had investments with people problems. Your assumed rationality can vanish in a crisis. So why not build your human imperfections into your game plan?
The Siren's Songs
In Greek mythology Sirens were beautiful half-bird/half female creatures, but you couldn’t trust their appearance. They lured passing sailors with beautiful music and melody toward their island home. While not quite as dramatic, the world of investing has never been short of sirens and their songs. These mostly manifest, not in tune, but in story.
Three Wise Birds
As a topic of conversation, investment is like sports. Everyone has an opinion. And the strongest opinions often come from those who spend more time in front of the TV than out on the field. Practitioners, meanwhile, are wary of anything labelled a sure thing.
Déjà vu all over again
Investment fads are nothing new. When selecting strategies for their portfolios, investors are often tempted to seek out the latest and greatest investment opportunities.
Take the rough with the smooth
A key to a successful investment experience is understanding how markets behave and developing the discipline to avoid rash decisions based on short time periods.
Better investment decision making
Making sensible investment decisions is difficult. We are subject to a range of behavioural biases. We have to cope with incessant noise around financial markets. We behave in ways that are inconsistent with our long-term investment objectives. So, what can we do about it?
Picking Winners
Finance journalists tend to write lots of articles about industries or sectors because these stories fit a current narrative. In the tech stock boom, it was the information revolution. In the mining boom, it was the rise of China.
Why do we make stupid investment decisions?
Although financial markets are awash with randomness and uncertainty, there are obvious, vital and, often simple, cues that as investors we seemingly choose to ignore or disregard. This results in poor choices and often disappointing outcomes.
Top Drawer Investments
One old adage about investment is that you buy a bunch of reliable stocks, stick them in your bottom drawer and forget about them. That ignores one pesky fact: nothing stays the same.
