Is it dumb to diversify shares or property? Diversification is not all it’s cracked up to be, according to a man who read my last column, which praised the spreading-your-risk idea. “Bill Gates didn’t diverse much, and it didn’t do him much harm,” he writes. “The fact remains that the richest people on the planet have become that way because they haven’t diversified.
One bad apple — New Zealanders are bad at diversifying. Most New Zealand shareholders are frighteningly undiversified. About 24 per cent of share investors own shares in just one company, and another 36 per cent hold shares in two to five companies, according to recent research by the stock exchange, NZX, and sharebrokers ABN AMRO Craigs.
Keeping financial advisers on their toes — good for the rest of us. A warning to financial advisers: You’d better give good, unbiased advice to your next new client. And the one after that. And the one after that. You never know which one might be a “mystery shopper” working undercover. If you do serve a mystery shopper, they will report on a website whether the advice you gave “is truly in the best interests of the individual client” — something that Joe and Joanne Blow often find hard to judge.
Seize the chance: A great way to boost your savings. Also in this issue: From the Mailbox — Investment as retirement approaches.
Complexity of financial products no accident. Confirmation, at last, of what we’ve suspected all along: Providers of financial products may deliberately make them sound complicated.
House prices should worry reader. I’ve just re-read an email from a reader, and it concerns me — especially in light of a recent Economist cover story. The reader put $80,000 into two rental properties six years ago, and it has turned into $255,000, “with very little effort on our part.”
Investing offhore not as risky as it seems. It’s an oft-quoted excuse for not investing offshore: If you do, you take on foreign exchange risk. But is it really risky?
How KiwiSaver will work for you. How you might react to the KiwiSaver programme in the recent budget depends on your circumstances. Under the programme, scheduled to start in April 2007, employed people, the self-employed or beneficiaries can contribute 4 or 8 per cent of their income to a saving fund.
The message in the foot and mouth threat. The “Invest offshore” message was loud and clear the other day, after the news broke that somebody may have released foot and mouth disease on Waiheke Island. By the time you read this, the claim may have been proven a hoax. Here’s hoping so. If that’s the case, take warning from it.
Index funds still the best, despite tax changes. An ice cream is still delicious without the chocolate dip. The same goes for index share funds. Since they made an appearance in New Zealand in the late 1990s, these funds have had a tax advantage over the other type of share funds, called active funds. It seems likely that the tax advantage will be removed soon. But even if it goes, I still think index funds are best.