Diversify your assets.
I have written before about companies and corporations that put maximising profits and shareholder returns ahead of their customers' interests by "clipping the ticket". It may only be a tiny clip here and another there but, over time, they can cost you a lot.
For example, you save $500 a month over 20 years. A "leading-and-principled fund" averages a 6per cent net return, so you end up with $233,956.
A "profits-for-us-but-not-for-you" fund averages 5per cent, so you get 1per cent less after all their little clippings and you end up with $208,316.
That's more than $25,000 difference.
Who are the clippers?
JPMorgan, Barclays, Citigroup, RBS, UBS, & Deutsche Bank were all caught rigging interest rates (another form of "clipping the ticket") and were fined billions. A whole lot of unidentified people somewhere paid hundreds or even thousands of dollars/euros/pounds more in interest than they should have.
The same attitude to profits will apply and clipping will apply to any investments you make. Here are tips to avoid "profits-before-all-else" companies.
Tip No21:
The companies pursuing profits before all else will be "clipping the ticket" wherever they can with your investments. They are not always visible and they will not lose all your money, indeed on the surface they may look OK, but they will be costing you.
Big profits
While you are doing your checking on Google, look at company profits, too. If they appear to be huge, be a tad cautious.
In their mad pursuit of profits, Volkswagen was caught out, their shares dipped by 30 per cent, making a nasty loss for their investors.
Tip No22:
Liquidity - access to your money. Wherever possible you should seek investments that allow you to access your money without penalty.
Fortunately most quality investments are liquid, with some you do have good choices available to you.
Never mind that you are sure it is OK to lock your money away, do not. Emergencies happen, often overnight, and your whole situation can change, sometimes forever.
I have seen quite a few in my travels:
-A grandchild with a long-term illness. The parents had a business and so the grandparents were asked to move close to them to help. A suitable house was for sale for $300,000 just a few metres away, so the grandparents did not hesitate; they pulled out their money and bought it (and sold their current house later).
-A 65-year-old in the early stages of Parkinson's heard about a new experimental cure at a cost of $100,000. Luckily, he had had immediate access to that sort of money.
-A daughter doing voluntary work overseas had a bad accident and it cost her family $100,000 to fly her home for urgent treatment.
In the past, most banks would allow investors to break a term deposit with a small penalty. Nowadays it seems that most banks do not allow that, so beware, you cannot count on a term deposit becoming available at short notice.
Fortunately, most quality bond and share funds are liquid at all times and you can get your money out within 10 days or so.
KiwiSaver is locked in
It is locked in to age 65 or for five years, whichever comes later. It is not available except in dire circumstances and even then, it can take a long time to get it out. As a rule, do not save any more into your KiwiSaver than you need to to get your employer's contribution and the Government's $10 per week. Save more but into a liquid investment.
Property syndicates are not liquid
In most cases, investors will own shares in the syndicate, but are not listed on the sharemarket. To get your money out, you have to find another investor to come in, and that can take months or even years.
We avoid property syndicates as they lack liquidity and lack diversification too.
Only one type of property is liquid
Shares in property companies listed on the sharemarket are liquid and can be bought and sold daily, eg Kiwi Income Property Trust, Property for Industry, Goodman's Property trust, and quite a few others.
All other property types are not liquid and can take months or even years to exit.
Loans to family & friends
Usually they borrowed from you as they needed money and so are unlikely to be able to pay you back in a hurry. Not liquid.