Some need to know, with a bit of WealthDesign nice to know thrown in.

Sometimes I think the share market is nuts!

Z Energy (ZEL) is a well-known New Zealand brand. The company owns the Z Energy and Caltex fuel distribution network. It is an integrated supply company, from crude oil to your local fuel stop.

In my view, this company is an infrastructure stock – the success of this company is based on their strong cash flow, and dominant brand.

On the 28 September, ZEL informed the market that they would dial back their debt repayment schedule, and increase the dividends paid to their investors. The weird market has responded by selling down ZEL and the share price is today trading at $7.36 (29th September 2017).

I think ZEL is a great long term investment and any time great companies sell at a discount, I’m the first to suggest being on the other side of the table, and being a buyer.

I suggest investors do some reading – visit NZX.com and look up the announcements and their annual reports. Make up your own mind, as it is your money.

If you would like to talk about investing, I love nothing more than sitting down over a coffee and sharing ideas about savvy investment.

John Barber
WealthDesign – a life well planned

Disclaimer: Please understand this is not personalised advice. I recommend any potential investor gets qualified advice before making any investment decision.

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Is your insurer for sale?

At present, there are two insurance companies for sale. Both OnePath and Sovereign Life are on the market. They are owned by Australian banks (ANZ and Commonwealth Bank of Australia respectively).

It isn’t surprising the banking organisations are selling these assets as insurers don’t have the return on capital, like other parts of the banking businesses (lending for example).

Banks are in the transaction business while insurance companies are in the relationship business. Insurers rely on good relationships; products that meet the clients needs both today and in the future.  Banks specialise in transactions like lending, overdrafts and mortgages (one-off transactions).

With the potential sale of these insurance companies, we don’t know who will end up owning them, or what the outcome will be. What this will mean for their existing clients is yet to unfold.

If you want to talk over the impact of your insurer being sold, give us a call as we love to catch up for a chat.

John Barber
WealthDesign – a life well planned

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Exchange traded funds (ETFs) are the next trendy investments. World wide, there is around a trillion US dollars invested in these funds. Basically, these are funds that are listed on various stock exchanges around the world and fund/companies invest in other assets, much like a managed fund.

The portfolios held by ETFs are normally linked to different indexes and automatically rebalanced to that index, for example the NZX 50 (the top 50 New Zealand companies by size).

The problem is you could find yourself in a fund that only ever buys companies after their share prices have appreciated. For example, company A grows in value because their share value appreciates and becomes worth more than company B. An ETF automatically sells company B and buys company A. This seems slightly illogical to me.

Since 2008 every equity market around the world has appreciated and ETFs have shown reasonable returns on the back of this market recovery. The fees on ETFs are very low and they have been a ‘set and forget’ type investment. In a rising market, this has been perfect.

Unfortunately life isn’t that simple and we will see a market correction at some stage (and we are due for one any time, as they usually happen every 8-10 years). These passive, follow-the-index type products will be shown to be what they are – a proxy for the market. If the market falls by 25%, so will these ETFs.

Personally, I don’t have a problem with ETFs, however an investor must have a solid investment strategy. Some of these ETFs are better than others based on the underlying asset. They have a place in investment portfolios, but how they are used needs thought.

Give me a call to discuss your situation and your investment strategy. Let’s see if ETFs are going to be a good fit for your investment portfolio.

John Barber
WealthDesign – a life well planned

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John’s to-do list for millennials

After last night’s workshop in Wellington, focusing on millennials and their finances, John has put together a to-do list. It’s aimed at getting you on the right track, if you’re a millennial or not.

  1. Do a goal setting exercise – where do you want to be in five years’ time?
  2. Get a Will and an Enduring Power of Attorney (EPA).
  3. Set up an insurance portfolio.
  4. Start a savings programme.
  5. Make sure your KiwiSaver is working as hard as you are.
  6. Get ongoing advice.

 

John Barber
WealthDesign – a life well planned

 

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The NZX50 is an index of the top 50 companies on the New Zealand stock exchange. It represents 90% of the market by capital value. Today the NZX50 index sits at 7600; in 2012 this was only 3450.

This bull run is indicative of most of the financial markets around the world. Basically, a monkey should have been able to make money in this market over the past five years. Unfortunately, the financial world doesn’t stay like this, and every so often (around the eight to ten year mark) there is a market correction – a nice term for everything turning to shite and people lose money!

It seems in this part of the cycle, people start to forget the basics and they over pay for assets, and think things can only ever go up in value.

Today more than any time in the past eight years, investors need to have an investment strategy. This strategy needs to have a capital protection element built into it.

If you own shares, know how their underlying asset would handle a 20% market fall. Would the company handle people not spending, or interest rates going up by 50%? Know what the debt levels are of the companies you are investing in. Don’t just trust and follow fund managers based on past performances.

In great times, blind monkeys can lead the crowd, but when things turn south, have your eyes open and don’t be one of the crowd.

In this part of the cycle we’re putting various strategies in place for our clients, with the intent of reducing the downside when the bull run ends – not wanting to be a spoil-sport, but it will end!

Call us now to make sure you’re in a good position to benefit from the market correction when it comes.

This guy sits at our reception at WealthDesign, reminding me of the bull run that we are currently experiencing (along with a fun trip to Shanghai a few years back, where I haggled a good price for him!).

John Barber
WealthDesign – a life well planned

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