We understand there is a lot of uncertainty in the market and we just want to highlight a few points on our position when it comes to managed funds (which includes KiwiSaver, Superannuation, UK Pensions, etc) and investing in property.
We hope this provides some hope, calm, clarity, and forward movement.
WHAT DOES THE CURRENT ENVIRONMENT MEAN FOR INVESTMENT FUNDS?
Simply put, our advice is to stay the course.
We’ve all been expecting another global financial crisis. No one knew what shape or form it would take but it’s come in the shape of a virus.
A crisis hits the markets approximately every 10 years. Obviously, this one is more unique and harder-hitting. This is one of the reasons why we started working with NZ Funds for example, back in 2010.
NZ Fund’s philosophy back then was that the world had just come out of an economic crisis and they believed the world would have another one. So, they decided to structure their portfolios to be prepared for the next time round (Downside Mitigation Strategy). As a result, their portfolios are experiencing far less downside (about 50% of what the market is experiencing). They’ve also moved their funds into a place where they are less volatile and will see more profit on the upside when the market does eventually turn.
The benefit of people who are in something like KiwiSaver is that while the market is down, they are still buying into units in the funds, but they’re buying them at a discounted rate. So they’re buying more of them with their money. So when the market comes back, they’ll again make exponentially more profit on the upside, because of the fact that they’re buying while the market’s down.
Our advice for KiwiSaver is not to change from a Growth to Conservative fund at this stage as you will actualise the loss. Just stay the course.
WHAT DOES THE CURRENT ENVIRONMENT MEAN FOR PROPERTY INVESTMENT?
We don’t have a crystal ball but at the moment. We are just not seeing the heat come off the desire to get into the investment property space. The recent OCR cut is likely to stay in place for the next 12 months which does provide some certainty.
Ex-BNZ Chief Economist, Tony Alexander, has said that if we’re going to see dips in the housing market it’s likely going to be mainly in the regions, with only a nominal dip in pricing in the main centres (which is where we recommend clients to invest) – with any dip in house prices to be short-lived.
Our position when it comes to property is that it’s not about ‘timing’ the market but ‘time in’ the market. We are only seeing real positivity across our client base who want to continue to be in the property space as they see it as being a ‘safe-haven’ asset.
We believe the time to invest is now.
We are not slowing down. Even if the property market does dip we still believe property – which is a long-term investment – will probably come back stronger than before.
At some point soon, COVID-19 cases in hardest hit countries will drop, or even stop like in China – a vaccine will hit – nations will one by one get beyond the curve of worsening diagnoses – markets will show signs of upward movement – borders once closed will reopen – and this will all be a welcomed distant memory……Markets will then rebound….
My point is – You don’t want to be the person who put their investment life on hold to wait for this turnaround. Warren Buffet, perhaps one of the most well-known investors once said: “Be fearful when others are greedy, and be greedy when others are fearful”.
For sure, get qualified financial advice on making decisions – that goes without saying – but our strong feeling is that those with a ‘business as usual’ mentality when it comes to investing, will gain from this current economic environment.
Stay the course!