You can’t always get what you want
The coalition of red, green and black has dismayed some, but there’s always brown sugar for someone.
What happens when you mix red, green and black together? From a business perspective you get some brown mud to wade through. So get your gumboots on, New Zealand.
However you voted, we are nearly all invested in the sharemarket through KiwiSaver funds, unit trusts or share portfolios.
Should you panic, make adjustments, or do nothing?
Let’s be clear. There’s absolutely nothing to panic about. The brown coalition is not about to cause our portfolios to catch pleurisy. In fact, some of those new policy announcements are quite crowd-pleasing.
You can’t always get what you want
It’s no secret I wanted Winston Peters to go blue, but being in business teaches you two things. Expect the unexpected and don’t tiddle around moaning about the weather.
A majority was created in an unexpected way, but 50.4 per cent of New Zealanders are now having their say and that is valid. When it comes to the economic climate, there is no such thing as bad weather, just a bad choice of kit.
There will be short-term jerky movements in the currency and shares as various granular policies are digested. Ignore these in terms of your portfolio.
A left-leaning brown coalition will create pockets of growth in different places. Fund managers won’t be procrastinating over the change in direction. They’re constantly scouring out opportunities and tilting your KiwiSaver portfolio towards these. Under every government there are winners to be found in the sharemarket.
In the longer term, it’s my view that a brown coalition will create more mud for businesses to wade through. There will still be growth and there will still be profits, but they will be less. This won’t create any turmoil, just a tougher environment for our retirement portfolios.
Adjusting your portfolio?
Am I sweating about it and adjusting my own portfolio? No I’m not, but that’s because I’m not overly exposed to our local market. I checked the asset allocation and this is how it sits:
❚ Cash 1.9 per cent
❚ NZ fixed interest 6.7 per cent
❚ International fixed interest 20 per cent
❚ Listed property 3.3 per cent
❚ Australasian equities 18.4 per cent
❚ International equities 49.7 per cent
Drilling down into Australasian equities, there’s 10.8 per cent exposure to New Zealand shares and a bit more coming from some of the listed property companies. I’m happy I’ve got the right-sized gumboots on.
That asset allocation is a personal one and not a reflection of everyone’s risk appetite. But the point is, do you know your own exposure? There’s rugby boots and racing boots and boots for drinking rum, sang Fred Dagg.
All three varieties seem to indicate an over-exposure to the local market.
I’m not hanging my bush-shirt on the New Zealand economy and nor should anyone with a balanced
Under every government there are winners to be found in the sharemarket.
outlook on risk. That’s not disloyal, or showing a lack of pride. It’s well-accepted portfolio construction theory.
NZ Ltd doesn’t rely on earning revenue just from Kiwis and nor should investors.
Many people now have sixfigure sums in KiwiSaver, especially when couples combine their wealth. Large amounts of money are at stake.
Most balanced or growth focused funds have an international share component. If our currency declines (as it has post-election) your shares are worth more in New Zealand dollar terms and gains feed through. Fund managers may have hedged some of this (removing currency gains and losses) but usually not all of it.
Countdown to 65
The retirement age looks set to remain at 65, but beware of the false economy in the celebration. It takes only a tiny change in the performance of your personal portfolio to neutralise this benefit or leave you worse off. Two years’ super is roughly $30,000 per person – an amount easily lost with inappropriate asset allocation over 10, 20 or 30 years.
Our very own footloose man
My biggest worry for ‘‘mum and dad’’ investors is Peters talking down the economy. It creates fear and stifles the amount we feel confident saving into sharemarket funds. While some can filter and put perspective on his rhetoric, others simply believe we are on the cusp of doom.
His voice doubles the impact with tones of distain and darkness.
There are always risks in the economy and at any given time there’s at least one asset class due for a slowdown. Over-riding that, consistent regular saving needs to continue in all conditions for wealth creation.
Last week Peters reminded us ‘‘you can’t always get what you want’’. Prime Minister Jacinda Ardern should look up the words of that Rolling Stones song he was quoting. The first verse finishes ‘‘at her feet was her footloose man’’.
He now faces a very big test of responsibility and commitment – every word and action matters. Footloose no more.
❚ Janine Starks is a financial commentator with expertise in banking, personal finance and funds management. Opinions in this column represent her personal views. They are general in nature and are not a recommendation, opinion or guidance to any individuals in relation to acquiring or disposing of a financial product. Readers should not rely on these opinions and should always seek specific independent financial advice appropriate to their own individual circumstances.