Why?

Well actually I would say why not? Why not invest in equities? Yes, in hindsight the best place you could have kept your money over the last year is in the bank, and the volatility of the markets combined with the media reports of the worst financial crisis ever make you feel intimidated, fearful. You want to wait until "everything is stabilised." That is sheer foolishness. There is one certainty that has stood the test of time. By leaving all your money in cash assets you will never reach your financial goals.

One simple way to get started without causing too much angst is to buy into unit trusts on a monthly basis. If you use a good wrap account you can even split your monthly investments. I recommend Europe, Asia and Emerging Markets.

I suggest you take a deep breath and jump in, contact an advisor.

Read More

Why?

Why do I continually meet people who live from payday to payday and why do I have to keep parroting the same lines. Financial freedom is not rocket science. Follow these simple steps.

• Spend less than you earn
• Join a subsidised superannuation scheme or KiwiSaver
• If you are in the position of having short term expensive debt pay it off.
• Take out insurance – income protection is essential.
• Set aside an emergency fund.
• Buy a property and focus on paying off the mortgage as soon as you can.
• Set up an investment portfolio.
• Attend to legal issues such as writing a will.

If you can’t do this on your own, get hold of a financial planner to help you. Less than 30% of Kiwi’s have financial plans.

Read More

Who’s Counting?

I am – and I am up to five – five great ways to find extra money.

One: Slash your credit card rate – you could take a term loan, clear the balance and cut your card up; if you don’t want to do this transfer to a low interest rate card; or alternatively increase you mortgage to clear your card and finally – if you have money in your savings account or term deposit pay off your card! The interest you earn is less than a quarter of the rate on your card.

Two: Lower your entertainment costs; hire a DVD and make your own popcorn, play board games with your family, go for a walk – instead of going out for a meal, prepare your own dinner, light candles and enjoy a bottle of wine which is at least a third cheaper than that at your favourite restaurant.

Three: Have a garage sale, invite your neighbours to join in, you may be meeting some for the first time but making money together is a great bonding process.

Four: Sell your used books to a second hand book shop – and try not to be tempted by buying more!

And finally revisit all your insurances you may be able to prune costs by taking on an excess, you may find that you now have unnecessary insurances BUT remember insurance is the umbrella which prevents financial ruin!

Read More

These Markets Aren't Emerging, They're Exploding

Look, it's not that "emerging markets" is a loaded term. In fact, it's a pretty exciting one. You're talking about countries that are transforming themselves in a few short years from being highly dependent on their ability to sell raw materials to the West into dynamic, information-driven economies with burgeoning middle classes and plenty of domestic consumption.

Yes, they're emerging. But that sounds a bit like a butterfly emerging from a chrysalis. This is different. These countries are blowing up.

If you look at the performance of indexes tracking some of the biggest emerging markets, you'll see shapes ranging from mountain-climbing to parabolas to moon launches. China, Brazil, India, Argentina, Vietnam, and Mexico have all seen their stocks markets double, triple, or more in the past three years.

America’s economy is too developed for the kind of explosive growth taking place in much of the developing world.

China, for example is on the move. Not in the way you think, with its ever-expanding external influence. No, China has 200 million people living comfortably and another 1.1 billion who aren't but would like to be. The result is the greatest migration in the history of humankind. Each month, the major Chinese cities receive enough new inhabitants that they need to build the equivalent of Houston - infrastructure and all - to handle them.

India's economy has heated up to the point where the government is trying to build stronger restrictions against foreign money pouring in to invest in the country. Yes, on a per-capita basis, India is poor. But by the same measure, they're turning money away at the borders. Even countries you don't think of immediately, like Vietnam, Argentina, and Malaysia, are enjoying staggering growth rates.

Obviously, you'd like to get involved with markets like these before they take off, so unless you've invested in them already, you've missed some enormous gains. But let me make three points: one historical, one prospective, and one differential.

Point 1
The historical one is this:

In hindsight, was 1987 a bad time to invest? Heck, no, for the very reason that the American economy was still at the beginning of a great transformation. The big fortunes were still ahead. Sell in 1987, and you're kicking yourself for the next 20 years ... and counting.

Point 2
By this same measure, the transformation ongoing in emerging markets worldwide is still in its infancy. It's going to continue -- in fits and spurts -- for decades. The growth prospects in China are still virtually limitless.

Point 3
And finally, the differentiation. While China and India have enjoyed salubrious rises in their share prices, they started at an extremely low base. Many people shun emerging-market investing because of the risks, the lower level of regulation, or the lack of protection. And they're right to be concerned. But things are improving in every country that has companies coveting Western capital, with the possible exception of Russia.

In fact, what I do every day is advise clients on these issues.

Read More

Finance and investments

Many people don’t begin their retirement savings until they are about 40- the mile stone that I refer to as “the age of reason”. It’s when you finally stick your head over the parapet, and, whether you’re male or female, think, ‘My god, 20 years have gone by and what have I done with my money? Not very much’ not surprisingly it’s at that point that people start thinking quite seriously about doing some saving.

I agree with a recent report done by the New Zealand institute of Economic Research which found little evidence of a savings problem among New Zealand households. The savings problem is not as bad as it’s been painted. The truth of the matter is that it’s where we are saving that is the real issue. Most of our savings these days are going into highly geared investments like property. We tend to run as a herd, and going against it, like not buying rental property is hard.

In my latest book-Money, Money, Money, Ain’t it Funny I highlight the difference between economic theory, where people make rational financial choices and practice, where spending is influenced by taste, whim, peer pressure, pride, envy and other considerations. Most people don’t save enough money; most of us have counterproductive financial habits which mean that ultimately most people are in fact broke when they retire.

How you save and how you invest is up to you. Brent Wheeler, a respected economist believes that investing in equities is the best choice for people planning for retirement. “I’m telling them to invest as much as they possibly can in equities, and to do it for seven years-plus. For retirement savings, that’s actually not a long time frame. There have been many complicated mathematical studies done which prove that historically, over a longer period, equities will outperform all markets, and that includes the property market.”

Whether you are biased towards property, cash deposits, shares or bonds, financial advisors say that getting educated, and in particular seeking out people with good track records in investing and investment advice are the keys to making good decisions in the current market.

Wheeler believes that if kiwis knew even a fraction as much about investment as they do about home renovation, many would be much better off. “To restore an Edwardian villa to some semblance of a nice trade off between what it was, and what we expect today, while reflecting what has happened to it over 100 years, is 90 times more demanding and involves a heap of more difficult judgments than saying, ‘Is it a good idea to leave this money in the bank?’ and ‘Why am I shifting it?’ or any other investment question. And that’s how people should be attacking investment-not trying to do anything too smart.”

Wheeler favours investment offshore. Homeowners have sufficient exposure to both the property market and New Zealand’s small economy, he says. “As individuals, we have huge exposure to this tiny economy sitting on a rock at the bottom of the world. We are heavily invested in New Zealand, which doesn’t spread our risk very much at all. After your house, your next investment should not be in New Zealand.”

I agree with Brent, the best returns will come to those who make the most of their investments in equities’ that are offshore. The New Zealand market has been doing well, but it’s not even two percent of the world market. A lot of the sectors where we expect growth are either not available here, or if they are they are in quite a small way.

Read more in Money, Money, Money, Ain't it Funny (Longacre Press, $29.99)

And check out www.brentwheeler.com

Read More