Managing your investments
Clients sometimes ask us about the research process that we engage during their portfolio construction. A selection of questions and answers can be found below, however should you have any specific questions not covered here, please feel free to contact your local Spicers adviser.
Investment advice
What are the key elements of a good investment strategy?
The best strategies have a clear statement about investment goals, reflect a sound understanding of the need to diversify investment assets and have an awareness of the need for patience. Patience ultimately gives the investor the benefit of both long-term market appreciation and compounding returns.
What sort of goals should investors be setting?
This will always depend on the individual. Investors nearing retirement should focus on income levels they can afford in retirement, based on their existing capital. Investors with more earning years before them should concentrate on the level of capital they will need to fund their retirement income and other future spending.
Why is diversification so important?
The importance of diversifying your investments cannot be overstated. Constructing a properly diversified portfolio is the investment equivalent of taking out insurance. It is one of the best ways we know of reducing investment risk. Proper diversification produces investment results that are derived from a wide range of sources, thereby reducing the risk of poor returns caused by difficult conditions for any particular investment type.
Can you explain how Spicers selects one investment manager over another?
Manager selection is an important part of our research process. Our investment team - AXA Global Investors (AXA GI) look at some key attributes which include a manager’s track record, their internal resources, whether they have global coverage and the quality of their investment team. Many investors don’t get past the latest 12-month results when selecting managed funds. This is unfortunate because there are no guarantees that impressive recent returns can be repeated. AXA GI will look behind the numbers to analyse whether good luck or good management has been the driving force of past performance. Where it is the result of good management and the organisation is committed to maintaining sound management practices, then there is more reason to be confident about future performance.
What effect does the New Zealand dollar's exchange rate have on our investments?
Anxiety about the exchange rate is an area where emotions need to be kept in check. In a relatively small country like New Zealand, where our equities account for less than 0.5% of the world’s sharemarkets, international investing makes a lot of sense. It significantly increases the range of companies and industries that investors can access, and reduces the reliance local investors have on the performance of the local economy. These benefits, however, require investors to accept the inevitable performance fluctuations that result from exchange rate movements. Although most investors understand the need for international diversification, when the exchange rate is low they typically want to keep all their investments at home, for fear of a rise in the exchange rate. Where possible, we employ an active currency hedging strategy to minimise the impact of a stronger New Zealand dollar on international investments.
Have you considered an investment in a Spicers managed fund? Contact your local Spicers adviser and discuss your options.