Shares, rentals, banks - or gold? Finance experts share their top tips on where you should invest after the Covid-19 lockdown. Plus, they give advice on areas to target that could save you money. Should you freeze your credit card - literally?
Covid-19 and the lockdown that followed undeniably changed the investing landscape, according to Craigs Investment private wealth research analyst Roy Davidson.
"Interest rates have fallen to fresh lows with the Reserve Bank now buying government bonds and looking at putting in place negative interest rates, while government debt the world-over has spiked.
"Structural trends, such as e-commerce, digital payments, and remote working have been given a boost, creating winners and losers, and we may see a wave of de-globalisation as countries and companies look to have better control over their supply chains."
However, Davidson said the golden rules of investing remained unchanged.
"In fact, in this environment, it's more important than ever to stick to them.
"This includes making sure your investment portfolio matches your risk profile and unique circumstances – if you're nearing retirement, you don't want to be caught out if the market falls a lot."
Davidson said diversification remained key and could protect your savings from surprise events.
"When investing in shares, focusing on quality companies with clear growth opportunities, competitive advantages and resilient business models is crucial."
Finally, Davidson said many people try to time the market, buying at the bottom and selling at the top.
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Davidson said while that seemed good in theory, it was next to impossible to do in practice.
"Instead, a good approach is to invest a certain amount across a range of securities each month.
"This smoothes out any natural ups and downs the market may have, allowing the value of your portfolio to build over time."
Fisher Funds Senior Wealth Management Adviser Vicki Watson said many companies had benefited from the lockdown including, supermarkets, internet providers and telecommunication services.
"So, it might seem obvious that shares in these companies might be the answer. However, there are a lot of companies who will struggle."
Watson said some believed the safe haven of banks was the option.
"We then have gold that many bury in the back garden when risk is high," she said.
"We all want to invest in shares in companies who will survive and thrive post lockdown - so how do you choose?"
Watson said fund managers research and choose companies that had long-term viability to perform, and simplify investing, by reducing the number of choices you need to make.
"Managed funds provide an array of companies to build your investment portfolio. Funds can be either growth, income or a mixture so you can select funds to meet your needs and timeline."
As for owning rental property, Watson said that was a huge undertaking.
"For many, the lack of diversification and liquidity would not suit investors post lockdown."
Banks? Watson said only for the short term.
"Very low interest rates make term deposits unattractive and do not meet income requirements."
Gold? Watson said some see this as insurance when times are tough.
"But like all good insurance, you have to have it bought it before you need it. The price of gold goes up when markets are fearful and often reverts to the original value when market sentiment is more confident."
In summary, Watson advised people to invest for their timeline and choose a mixture of investments to spread the risk.
"Remember to make sure you can access these investments for cash when needed."
Watson said choosing between a credit or debit card depended on personality.
"If you are not disciplined to pay off your credit card each month then opt for a debit card otherwise you will rack up huge interest charges.
"Although, economically a credit card paid off each month makes more sense - you end up with about a month's free credit."
Trimming the fat - Areas you should target to save more each week
Fisher Funds Senior Wealth Management Adviser Vicki Watson
1. All those subscriptions and apps on your phone you thought were a good idea at 3am in the morning. Go in and cancel them now – all of those $9.99 purchases add up.
2. Leave your credit card at home or better still put it in a glass of water and freeze it. By the time it unfreezes, you may have changed your mind on that purchase.
3. Of course, we all know the $4.50 coffee a day adds up to over $1600 per year. Even worse lunch out each day at work is well over $3500 each year.
4. Pay off your credit card each month – interest rates charged on these should be illegal.
5. Tell yourself you will go for a season without buying clothes. You can do it!
Westpac NZ regional manager for Bay of Plenty and Coromandel, Susan Grey
said Covid-19 had hit many Kiwis hard and the Bay was no exception.
"We're working really hard to meet the needs of all our customers, including nearly 3000 people in our region who have asked to defer or reduce their repayments on home or personal loans.
"While the level 4 lockdown period was a stressful time, it gave many households a chance to review their spending, and perhaps get into some good money habits."
1. The most important thing any household can do is draw up a list of weekly or monthly expenses so you can see exactly where your money is going. This will make it much easier to work out where you could be spending less.
2. Set aside all the money you need for bills in a separate account as soon as you get paid. You can then use whatever is left over to spend as you like – or put into savings.
3. Try doing your weekly supermarket shop online – that way you'll only purchase what you need, instead of making impulse buys in-store.
4. Leave the car at home and consider walking, biking or ridesharing where you can. You might be surprised at how the fuel savings add up.
5. If you found yourself not missing takeaways during lockdown, consider eating more home-cooked meals and making takeaways a special occasion food.
6. Remember to keep supporting local businesses – they're relying on you – but be conscious of where your money is going. If you have subscriptions or memberships that you're not using, that money might be better spent elsewhere.
7. If you need more budgeting advice, talk to your bank. Westpac's free Managing Your Money workshops help thousands of Kiwis every year to improve their financial literacy.
Rotorua Kiwibank branch manager Maxine Phelan
said fear of missing out was real, but she advised not to let it derail your savings plans.
"Having goals that really excite you and setting clear deadlines can help make saving a bit more do-able."
Phelan's advice is even if you can only afford to put aside a few dollars a month, do it.
"Not only will those few dollars eventually add up to something substantial, but you'll also start forming good savings habits."
Rather than save whatever's left at the end of the month, Phelan suggested doing things the other way around.
"Set your savings aside as soon as you're paid. Work out a budget to see how much you can afford to save - just make sure you're being realistic, otherwise, you won't stick to it."
One of the first things you should think about saving for is an emergency fund, Phelan said.
"Life doesn't always go to plan, so aim for enough to cover you for at least three months' expenses. That way if something unexpected comes up, you won't have to dip into debt to sort it out."
"Once you've got your emergency fund covered, think about what else you want to achieve and how long you think it will take to get there.
"Having concrete goals, like saving for a holiday, a car, or a house deposit, tends to be more motivating than just simply saving for the sake of saving."
Retirement might sound like a long time off, but to make it comfortable Phelan advised to start thinking about it early.
"KiwiSaver is a simple and affordable way to save for your retirement. It's voluntary but comes with a lot of great incentives to join up.
"It makes saving easier because the money you contribute comes directly out of your pay before you receive it."
Making a decision about joining a KiwiSaver scheme is an important one, she said.
"As with any investment, it makes sense to do your homework and choose a scheme that best suits your individual needs.
"Your money is generally locked in until you turn 65, but first-time homebuyers may be able to dip into their KiwiSaver accounts to help fund their first home."
* Disclaimer: Please note, this is intended as general information only. It does not take into account your financial situation and goals and is not personal advice. For advice about your particular circumstances please see a financial adviser.