This article was published on 9 December 2006. Some information may be out of date.

Q&As

  • Should retired couple invest in a commercial property? Why take on that risk?
  • Can we predict NZ dollar movements?
  • When is it best to change money from US to NZ currency.
  • A US website that evaluates international charities.
  • Yet another charity offers a Christmas gift programme.

Plus: Win a ticket to a seminar

WIN A TICKET TO A SEMINAR

Mary Holm is presenting her first seminars for the public in February and March next year.

TEO Training, which is running the seminars, has offered to give away six tickets, valued at $200 + GST per person, to readers of the Weekend Herald.

The three-hour seminars will cover key points from Mary’s book “Get Rich Slow — How to grow your wealth the safe and savvy way”. Participants will be given a copy of the book.

The seminars will be held in the following cities:

Auckland — Albany: Feb 12, 1–4 pm
Auckland — Ellerslie: Feb 13, 1–4 pm or March 29, 9.30 am – 12.30 pm
Auckland — Parnell: March 29, 3–6 pm
Christchurch: March 27, 9 am – noon or 1–4 pm
Dunedin: March 28, 9 am – noon
Hamilton: Feb 14, 3–6 pm
Hawkes Bay — Taradale: Feb 16, 9 am – noon
Palmerston North: Feb 15, 2–5 pm
Tauranga: Feb 14, 8.30–11.30 am
Wellington CBD: March 26, 1–4 pm

To be in the draw to win a ticket, send an email to [email protected] with the subject “Seminar draw”. Include:

  • Your answer to the question: How many tickets are being given to Weekend Herald readers?
  • Which seminar you would like to attend.
  • Your name and postal address.

Entries must be received by Wednesday December 20, 2006. Winners will be notified before the end of December, and their names will be published when this column resumes in January.

QWe are a retired couple 65 years of age, both at long last receiving the pension of approximately $20,000.

From the sale of business and investments we have about $1.2 million from which we want an income of $36,000 at least, plus capital appreciation to keep up with inflation.

We have some invested with a reputable advisor, which did well last year but not so good this year so far.

We have received a variety of advice, from giving all of it to be invested in a balanced portfolio to purchasing a commercial property costing $2 million. To do that, we would get a mortgage, which would still leave us income of 9 per cent or $108,000, and presumably the property value would keep up with inflation.

It is very hard to get unbiased advice. What do you suggest?

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.

QCan you tell me why the New Zealand dollar is so strong these days?

I remembered that the economists had forecast it to drop significantly by the end of the year. Is this upward bound for the short term or not? Please advise.

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.

QI currently have US$170,000 in a bank deposit.

Given the US dollar is weakening, should I hold onto it or either convert part of it or the whole lot into NZ dollars?

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.

QI read your columns recently about charity giving. Here’s a site that I found which is terrific. It’s an independent and free evaluator of charities.

It’s American, but does assess well-known international charities. Pretty comprehensive and interesting.

It’s called www.charitynavigator.org.

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

QCongratulations Mary on your column, which has recently increased awareness of the often forgotten non-profit sector.

One of your articles referred to aid agencies providing Christmas gift catalogues. Your response omitted ChildFund New Zealand — and our Gifts that Grow catalogue that people can get via 0800 223 111 or at www.childfund.org.nz. We trust you will include this in an update to your readers.

In another of your letters, one of your readers raised concerns about the transparency of donations being used to meet charitable institutions’ overheads.

As you rightly state, no charity could manage a successful organisation without paying for some overheads.

If your readers are looking to support transparent charitable organisations, they should ask to see the organisation’s annual report and audited accounts. Irrespective of the Charities Commission requirements commencing next year, these should clearly demonstrate the organisation’s financial record.

For instance, each year ChildFund New Zealand receives a set of unqualified accounts from KPMG chartered accountants, which highlight that over 80 per cent of sponsorship money is remitted overseas to the benefit of the children in need who we support.

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.

Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.