MANAGING WEALTH: Timing all important with investments

THE New Zealand sharemarket has been pretty uninspiring for investors lately, as latest figures have shown.
The NZX Top 50 Gross Index, measuring the performance of our top companies, declined 7.5 per cent over the first six months of this year.
That compares with the Australian Top 200 Index which is down 9.9 per cent through the same period, and the US Standard & Poor's 500 falling 6.27 per cent.
This underlines the fact that here in New Zealand we are not exempt from the negative impact of international economic events, no matter where in the world they occur.
The dominant economic story over the past quarter has been the sovereign debt crisis, particularly in Europe, and the measures being taken by countries there to improve their financial positions.
For the most part, this has involved austerity measures affecting the wider population, and government cut-backs in expenditure and increases in revenue have been a common theme.
Unsurprisingly, we have seen protests in the streets in Europe as the change in people's economic circumstances can be difficult to accept.
But these changes are indeed essential, if investors are to have confidence in sovereign debt, and continue to fund governments' fiscal requirements.
So why should this affect us here in New Zealand when so many of our economic fundamentals are sound?
We have seen rising commodity prices for our exports, new formal agreements with our trading partners, a sound and stable banking system, lower than expected unemployment figures, and even our fiscal deficit turnout was better than expected.
In many ways we should be a haven for investors, as we are geographically and economically isolated from the shocks now apparent in the western hemisphere.
The answer is that sentiment drives asset prices, and we are not immune to the current concerns of investors worldwide. There is a strong degree of negativity at present, particularly concern there may be a second leg to this international recession that emerged in 2008.
Capital is a movable asset that will seek out the least risk and best return, wherever in the world that may be. New Zealand's financial markets are small and relatively illiquid, and this contributes to a risk premium built into international investment here. So where to for investors? At current prices there are great opportunities for the purchase of growth assets at compelling prices - but they may go lower yet.
That is the conundrum facing investors, particularly for those trying to time the market. The risk is that sentiment can change quickly and the opportunity to invest at advantageous prices can pass quickly.
In most cases it is better to invest in safe sectors at good fundamental values which will stand the test of time, even during the inevitable rises and falls in markets as they pass through the economic cycle.
Disclaimer: The above comments are for general purposes only. This article is not intended to constitute investment advice under the Securities Markets Act 1988. Disclosure Statements for Forsyth Barr and any of its investment advisers are available on request and free of charge. * Russell Garland is a qualified investment Adviser with Forsyth Barr in Tauranga. Phone: 0800 367227 or email: russell.garland@forbar.co.nz.