Investing in property has been popular in recent years, with many people buying apartments or homes to rent out as an investment strategy for later in life.
But while landlords have benefited from rental growth, as well as capital growth in house prices, increasing building costs, a cooling housing market and rising home loan rates are making this area of investment less attractive.
And let’s not forget the amount of regulatory changes we’ve seen in recent years to help slow down the ‘gold rush’ in the housing market. This is of course to benefit people trying to get on to the property ladder for the first time – which I’m all for!
Other investment options
That said, it’s more important than ever to make the most of your savings and investments. Rather than putting all your eggs in one basket, have a think about other options to help you build wealth and spread your investment risk.
So that leaves us with the question: If not property, where should I invest? Let’s talk for a moment about bonds and shares.
Most New Zealanders’ wealth is tied up in the family home, so investing in bonds and shares is a great way to diversify your investments and leave your overall wealth less exposed to New Zealand’s housing market cycle.
Starting out with shares and bonds
If you want to test the water, the best way to start is by investing in a diversified portfolio that’s managed by an expert. These are called managed funds.
So if you’re keen, here are some things you may want to consider. If done right, you may reap the rewards. You can thank me later.
Managed funds have a mix of investments. These can be a range of shares in various companies, or in other investment assets such as cash, bonds, and even commercial property.
By investing in different securities across many sectors, your risk to any one investment is mitigated. Doing this not only spreads the risk, but the poor performance of one investment can usually be offset by the better performance of others.
Many people might see investing in shares as being high-risk and complex, and it’s understandable why they do.
Volatility of investments
Compared to other things, such as investing in property or your own business, the way that shares are reported on and the frequency with which they are valued is very different; they are typically valued every day.
Values can be up one day and down the next, depending on economic sentiment as well as company performance – so the thought of your investment value going up and down every day can be, at times, unsettling. You don’t get your property valued daily, so don’t look at your investments every day. I’d recommend reviewing your performance quarterly or annually, again depending on your investment time horizon.
Be clear on your time frames. If you put your savings in to a managed fund, you need to have a reasonable period of time in mind (generally, 5+ years). As a long-term investor, you should have enough time to recover from periods of short-term market weakness.
Remember, diversification is the only free lunch in investing. It allows you to mitigate risk and, in doing so, may lead to better return outcomes over the long term.
If you would like to know more about managed funds, our BNZ Authorised Financial Advisers will be happy to help. Call us on 0800 269 5494 and select option 2.
This blog is solely for information purposes (and is only for New Zealand residents]. None of the matters in this blog are personalised financial advice. We recommend that you seek financial advice specific to your personal situation and goals from an Authorised Financial Adviser. No representation or warranty is made as to the accuracy, reliability or completeness of any statement made in this blog. Neither BNZ nor any person involved in the preparation of this blog accepts any liability for any loss or damage arising out of the use of, or reliance on, all or any part of this blog. The information and recommendations are the personal views of the author and do not necessarily reflect the views of BNZ.
BNZ Authorised Financial Advisers’ Disclosure Statements are available on request and free of charge. Past performance is not an indication or guarantee of future performance.
You must log in to post a comment.