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The current bull market won’t last – be prepared for what’s next!

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