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.
The inherent differences between property and share investments. There’s a fundamental difference between investing in shares and property, a reader says in an email. “With a stock there is always the risk of bankruptcy of the entity you invest in, and the investment you make becoming worthless,” he writes.
Gearing can boost returns, but also risk. Gearing — which happens when you borrow to invest — comes at a price. And I’m not only talking about interest. While gearing makes a good investment better, it also makes a bad investment worse. People who gear boost their risk.
Rentals not necessarily as good as they seem. Rental property is sometimes an excellent investment. There, I’ve said it, for all those who reckon I’m anti-rentals! Often, though, rentals are not quite as good as people think — and not just because the tax breaks are over-rated, as I said in my last column.
Rental property tax breaks don’t amount to much. I don’t get it. Politicians and economists have been complaining lately that rental property has tax advantages over shares. It’s hardly a new claim. But what are these advantages — beyond depreciation, which is vastly overrated?
Research shows how to invest in shares. Pictures may speak louder than words, but numbers speak loudly too at times. Some recent research shows, numerically, why it makes sense to: Stick with share investments when they lose value; Invest in both New Zealand and international shares.