Tower's fall: it's the shares, not the funds

By MARY HOLM

Q: I have a retirement investment with Tower Corp of about $40,000. It's not much, I know, but I entered in at a late stage after a marriage break-up and consequent settlement.

I am basically shattered by the news this week about its massive drop in shares, more especially as I am nearly 60 years old and hadn't intended to work until I'm 95!

So I decided to email you to ask if you have any words of wisdom for me. I know that the wrong time to pull your money out is when shares drop, but is this the case here with Tower?

A: Relax! You're okay.

You seem to be confusing shares in Tower, the company, with Tower's investment products.

About 68,000 New Zealanders, and a further 51,000 foreigners, hold Tower shares. Many acquired the shares when the company demutualised, in 1999.

The value of those shares has dropped a lot this past week, after Tower's announcement of a predicted loss for the year that ended September 30.

To make matters worse, I suspect that lots of the shareholders don't own shares in many other companies, if any. But I'm much too nice to remind them, now, of the dangers of being a One Share Wonder.

Should they hang in there? The company says there has been a "significant over-reaction", that many of its problems are one-offs, and that "Tower still has a strong future".

I'm not in a position to judge if that's true. But if I were a shareholder I would wait a few weeks until things have settled.

Then, unless I also held shares in many other companies, I would get out. Not because Tower is necessarily a bad share, but because having one or a few shares is unnecessarily risky.

You, though, are a member of a different group, investors in Tower's funds. Those funds hold lots of different shares, or fixed interest, or property, or combinations of those.

"Investment funds are not affected by the Tower share or profit issues," says the company. "Those assets are held separately."

That's not to say your fund won't ever slump. If it's got significant share or property holdings, and there's a widespread downturn in the relevant market, your investment will be hit.

That's when you need to remember that that's not the time to get out. If you wait, things will get better.

By the way, I don't sniff at savings of $40,000. Good on you!

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