Shares should be on savings menu -expert

Stuart Williams, head of equities management at Nikko Asset Management's New Zealand operation. Photo/Dean Purcell.

Kiwis need to consider investing in shares to fund their retirement because interest on money in the bank won't be enough to keep up with rising costs, a local fund manager says.

Stuart Williams, who manages billions of dollars on behalf of KiwiSaver funds as head of equities at Nikko Asset Management, said mum and dad investors shouldn't be put off by recent volatility in the share markets.

"There is always something to worry about. The main thing is for people to be engaged with their money."

"People need to think medium to long term. They are going to live longer than their parents did."

Williams said investing in shares provided a natural hedge against living longer as over time the value of shares tended to increase more than inflation.

"Money in the bank will not do that."

While core inflation was low Williams said in reality costs were still rising.

"There is still an element of unavoidable inflation through rates, school fees..."

"Petrol prices are going down but if you want to travel overseas it's going to cost more."

Williams said he believed one of the biggest problems for retirees was leaving their money in the bank.

"When people get there they just leave their money in the bank - but they are going to get a lesser rate than they have ever seen before.

"They might have thought they needed 30k a year to retire on but all of a sudden that's not going to be enough."

Williams said the risk was that people went into sub-grade fixed interest investments like finance companies again.

"People at a very basic level are being forced to look at asset classes other than cash."

Williams said there were still good opportunities in the New Zealand share market and it was not just dividend paying stocks people should consider as an increase in capital through a rising share price could also be used to fund retirement costs.

Williams said people needed to put the recent volatility into context.

"The world is not broken. If you look at New Zealand we have got a good functioning government, responsible fiscal policy, a transparent Reserve Bank with bullets to fire.

"We cant control the exact price of commodities and low prices cause stress but it's not like there will be no market for dairy or beef. The world likes protein."

People at a very basic level are being forced to look at asset classes other than cash.

Stuart Williams

Williams said recent fears over China were also overblown.

"China has increased its GDP by nine times in the last 14 to 15 years.

"The fact that it is not growing as fast as it was 10 years ago is a maths problem."

Williams said China was still growing at fast pace and was also rebalancing to a more consumer focused economy which would have benefits for New Zealand exports like dairy.