Now is the time to budget for a better life.
Martin Hawes NZ Herald, Sunday, June 21, 2009

The first step towards investment is having something to invest.

We can talk about things such as yields, rates of return and the state of the markets as much as we like, but it is an academic exercise until you have some money. The thing most likely to dictate how much money you have is not your rate of return, but your rate of saving.
A lot of investment capital with moderate returns will beat a little investment capital with great returns any day.

At this time especially, when the investment climate is so good, your priority is to make sure you have as much investment capital as possible so you can take advantage of cheap markets.

If you want to get ahead, you must have a surplus.  All of us - individuals and families as well as societies - depend on surpluses to improve our positions and make life better.

I'm sorry for the language, but I am going to have to use the "B" word: to get a surplus you have to spend less than you earn and the best way to do that is to budget.  The word "budget" has had a bad press, but it is just a plan for you to see where you will get your income from and what will be left to invest for your future.

With economies in recession and markets volatile, now is a great time to have a surplus. If that means living to a budget, so be it - that is the price you have to pay for a better life. Investment returns are likely to be so strong over the next decade that any sacrifice you make will be worthwhile.

All of this may seem like the bleeding obvious, but, if it is so obvious, why are so few doing it? My guess is that many people will look back at these years with regret and disappointment and see a missed opportunity.

I am not necessarily saying you should sell the kids to get into these markets (although if you got a good enough  offer ...). Nor am I saying that now is exactly the right moment to buy shares or property. I am saying, quite emphatically, that there is good value appearing in the markets, and you should be investing as much as you can over the next few years.

You should increase your rate of savings so that you can enjoy a great investment rate of return.

This is a strategic, long-term view of your finances. It is positioning yourself to take advantage of the times. You have an opportunity - will you take it or let it slip by?

Property Best Option?
Rich by rental? Don't bank on it
Mary Holm NZ Herald, Saturday June 06, 2009

Q: I am concerned about the unfortunate investor in retirement or approaching retirement who chances to have his/her life savings invested in the markets at the time a slump occurs.

I have a close friend who has been saving diligently over the past 40 years through a pension fund that has now reached maturity. In August 2007 the redemption value of the policy was $60,000, but in the ensuing 18 months almost 50 per cent has been wiped off the value of the savings. If cashed in today she will receive only $30,000, a harsh penalty for not getting her timing right.

There is risk associated with everything we do in life and this especially applies to our retirement savings, be they in shares, property, fixed-interest securities or cash. Over an adult lifetime the cash and fixed-interest securities tend to be eaten away by the ravages of inflation. And the value of shares, commercial and industrial property tend to demonstrate high volatility reflecting the economic conditions of the day.

What I like about residential property (freehold house and land) is that people need to be housed no matter what the state of the economy, and the volatility in the housing market tends to be less marked. Even in the current downturn the apparent loss in value in the housing market (I do not include flat and apartment complexes) has been considerably less than the corresponding losses in fixed-interest and sharemarkets.

I accept what you say in that gearing to buy property has its risk, but it also offers the opportunity to significantly increase one's personal wealth. People do this all the time when buying a home to live in, and extending this idea to buy another property or two over a period of time does not strike me as being high risk.

Friends or Foes?
Who will weep for Banks?
NZ Herald, Sunday, June 14, 2009

When interest rates rise or fall there are winners and losers. Those with mortgages cheer a small drop in lending rates; investors, many relying on investment yield, suffer when deposit rates fall. But the customary differentials are being twisted as banks baulk at following the signals given by the Reserve Bank's Official Cash Rate.

The OCR has plummeted in the past 12 months - from 8.25 per cent to 2.5 per cent - but banks haven't been keeping pace. This week MPs on the multi-party finance and expenditure select committee said banks were charging too much for their variable rate loans and pointed out that their profits have remained high during the recession. Reserve Bank Governor Alan Bollard echoed the point, insisting that there is still room for the banks to cut shorter-term lending rates.

Predictably, the banks hit back saying that their margins are being squeezed by "brutal" competition for the investment dollar. But it was hard to weep for them when ANZ National chief executive Jenny Fagg proudly told Morning Report that the Australian banks were "four of the 10 top-rated" (read "profitable") banks in the world.

In a recession, when there is a squeeze on global liquidity, a strong banking system is important to our economic viability. But in balancing the books, the banks are plainly leaning too far their own way. A bank that decided to break ranks and put people before profit could well find that people remember that fact - and reward them with custom when times aren't so tough.

At WMS we have a sound knowledge of investments and the expertise to apply this knowledge to your individual situation leading you towards tax effective, financial independence.  Taking action today will ensure that you can enjoy tomorrow. One of our advisors will call you in the next few days to discuss this in more detail.

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