NZ Herald 9 December 2006

AUnless you know lots about commercial property — and your letter doesn’t suggest you do — I would stay away from it.

Sure, many people do very well with it. But it’s an investment area in which knowledge really matters — much more so than in shares, for instance.

I suspect that those who know commercial property often do well by selling to those who don’t — at too high a price.

I’m also worried that you’re considering investing in just one property. I would be somewhat happier if you had, say, a quarter share in four properties.

The value of a single property can be hugely affected by such things as zoning changes, a shortage of tenants for a while, the opening up of a new area nearby, or the changing nature of a neighbourhood.

It’s all pretty risky. And, in your really strong position, you don’t need to take risks. Why expose yourself to unnecessary worry?

A balanced portfolio is a far safer way to go. You could put part of your savings into bank term deposits and high-quality corporate bonds and part into diversified shares, which should together easily bring in your $36,000 a year and give you inflation protection.

A good adviser can help you set that up.

Don’t judge your current adviser by the fact that your investments haven’t done well recently. That may just reflect the markets in which they are invested. But do ask the adviser why it has happened.

To get a better feel for whether you have a good adviser, go to the Retirement Commission’s www.sorted.org.nz and click on Investing, and then Advice Checklist and Paying Your Adviser.

While you’re on the website, you might find the 60+ calculators helpful for understanding your situation.

Broadly speaking, though, you are in great shape. Don’t jeopardise that by going for a lot more wealth you don’t need, and possibly ending up with a lot less.

ASorry, but I don’t know.

I could ask some economists. But, given that they got it wrong earlier this year, how can we be confident they will be right this time?

There are so many factors that go into foreign exchange rates, and many of them are unpredictable. As a result, forecasts are wrong about as often as they are right.

Some economists admit as much, adding that they make forecasts only because they are pressured into it.

A wise person makes plans that allow for either upward or downward currency movements.

AIt depends where you plan to spend the money.

If it’s in the US, it’s best to leave the money in that currency. If you move money from country to country and back again, you’ve got just as big a chance of losing as winning. And, because of transaction costs, more people end up worse off than better off.

If you plan to spend it in New Zealand, I suggest you gradually switch to the local currency.

You might, for example, move quarter of the money now, quarter in six months, quarter in 12 months and quarter in 18 months.

Then, whichever way the two currencies move, you will get a relatively good exchange rate on some of your money, and a relatively bad rate on some.

That beats getting what turns out to be a bad rate — with the benefit of hindsight — on the whole lot.

Of course it’s not as good as getting a top rate on the lot. But given that we have no way to accurately forecast the rates, it’s a low-risk strategy.

It’s rather like diversification — investing in a wide range of shares, bonds, properties, finance company debentures, or whatever. You don’t have all your money in the bad stuff.

AThanks. I don’t know anything about the people who run the site, but it does look helpful.

AThat makes four charities through which people can buy gifts for the needy on behalf of their friends and family. It’s a great idea that is obviously catching on.

Asking for an annual report is another good idea, especially if you are planning a significant contribution.

Come to think of it, most charities have websites, and those with nothing to hide probably put at least summaries of their annual reports on their sites.