Weekend reading (27 & 28 May 2017)

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.


allocation, asset allocation, Kiwisaver, media

About the author 

Sonnie Bailey

In his spare time, Sonnie likes telling people that he’s a former Olympic power walker, a lion tamer, or that he is an orthodontist. He is none of those things. In reality, Sonnie is a financial planner based in Christchurch. Through his business, Fairhaven Wealth (www.fairhavenwealth.co.nz), he provides independent, advice-only, fixed-fee financial planning services. Sonnie is a “recovering lawyer”: he has specialised in trusts and personal client work. He has also worked as a financial services lawyer for many years.

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