Weekend reading (27 & 28 May 2017)

I'm not a big consumer of traditional forms of media (I talk about sourcing media here). But I enjoy reading the "Your money" section in the Saturday edition of The Press each week. 

Last week there were a couple of articles with important messages:

  • "Are you missing out on $1m?" by Janine Starks. Starks points out that of the $38 billion in Kiwisaver, $10 billion sits in very low-risk, conservative or default funds. She states that "In March 2013 default funds commanded 36 percent of our money. It has edged down to 27% percent in 2017, but for the last four quarters things have barely shifted". In other words, a lot of people are still in their default Kiwisaver funds. Using the example of a 25-year-old investing $5,000 for 40 years, she extrapolates a return of 6.1% for a default fund and 9.2% for a balanced fund (based on the last 5 years of data). The difference from this "small" decision (or failure to make a decision)? About $600,000. 
  • "You can be your own worst enemy" by Susan Edmunds. In this article, Edmunds points out that it is usually isn't external circumstances that get in the way of people achieving their best investment outcomes. She says that "you are yourself the thing most likely to get in the way". She quotes Cristiano Bellavitis from the University of Auckland Business School: "Although investors think that they can time the market, and eventually buy low and sell high, most of them end up doing the opposite. It is not easy to hold on to a market that goes down rapidly and investors are tricked by emotions and prefer to get out". Richard James of NZ Funds suggests that "the best advice for [many] investors was 'don't look'" at their investment portfolio. 

Two phrases Edmund's article reminds me of: 

  • "Trading can be bad for your wealth"
  • "Most financial advisers don't have clients with investment problems. Most financial advisers have investments with client problems." 

Both articles are worth reading.

Sonnie Bailey

Sonnie is the founder and principal of Fairhaven Wealth.

Before founding Fairhaven Wealth, Sonnie worked in the legal and financial services industries for over a decade.

Sonnie first became involved with financial advice as a specialist financial services lawyer. For many years, he was an “adviser of advisers”, reviewing thousands of advice files prepared by hundreds of financial advisers, and providing feedback in relation to the quality and appropriateness of advice; industry best practice; risk management; and regulatory compliance. He has published work in industry publications and spoken at various financial advice conferences.

Sonnie has also worked with banks, investment management firms, insurers, and derivatives providers.

Sonnie has worked as a private client lawyer, focusing on succession, estate planning and trusts. He ran his own legal firm in Australia before relocating to New Zealand. He has also acted in independent trustee and company director positions.

Sonnie is passionate about helping people achieve their goals and manage the risks to which they are exposed.

He has written extensively on his blog, New Zealand Wealth and Risk, which can be found at www.wealthandrisk.nz.

Sonnie is married to his wonderful wife Chrissy, and has two young children, Ben and Anna.