Tony Brazier
The Press - Wednesday 18 August 2010
Is There Anywhere Safe?
In all walks of life people take sides. If you belong to one school, it can do no wrong. Being a member of your sports team means that your champion is better than theirs, in your eyes. It is human nature to be drawn to groupings of comfort and then to offer your loyalty. Therefore it is no surprise that different people favour different forms of investment when they plan their retirement funding and some find it difficult to expand their horizons beyond the one that they have initially chosen.
Often this is due to advice given to 'stick to your knitting' and 'not to put money into areas that you do not understand'. Often these advisors should be saying 'stick to my knitting, and don't put your money into areas that I don't understand'. I've found this to be true of the odd related professional when advising on the benefits of property to their clients.
It is a wise advisor that sees the benefit in other investment avenues outside of their own area of preference and expertise. The advisors and Media commentators that bag other avenues, as some do, often do so because they are obviously not going to make any money out of encouraging investor funds away to the opposition.
Having said this, in economic times like these, it is blatantly clear that no matter what avenue of investment is chosen it comes with some risk. Short of putting it in the bank, (even then that is not assured throughout the world as being totally safe,) even low risk investment can be subject to external forces beyond one's control.
One only needs to look at the reaction to the property market when it was waiting for the budget announcement to see this. In the deposited funds and share markets the stunned and dazed looks on the investors' faces around the country show that the risk is with those who are chosen to manage them as much as with the investments themselves.
A simple change in government legislation, a bank's reaction to its own previous practices or even in recent times a public roasting of a fund manager prior to any evidence of wrong doing, can come completely from left field and affect the investors.
So is there anywhere safe? Of course there is, but presently the markets are acting as if there isn't. People can only sit on their hands for so long and then they must realise that all progress requires risk. It is just a case of managing it. We have to be sensible and look at what has happened in our markets in relation to history.
The 70's taught us that letting the reins go on inflation only means that there will need to be a sustained period of Legislated freeze. The 80's taught us the true value of pieces of paper giving shares in a company and the 90's taught us, locally anyway, that to build uncontrollably without consideration for the demographic and migration needs of a city is just plain dumb.
So, what have we learned through the last decade? That we should all be dairy farmers?
I think the important lesson is to keep your portfolio well spread. Seek out individuals in the various areas that have well proven track records and don't let them use up all of your money in their one avenue. If they don't recognise that other avenues can be equally beneficial and that their particular investment type can be affected from left field then get a different advisor. Spreading the risk mitigates the affects of losing all eggs in one basket.
You can rest assured that there are investors in today's markets doing extremely well, possibly because they have little competition for the offerings. As all markets claw their way back to popularity over the next year or two, investors should analyse this current trauma in light of similar ones over the decades. The share market, more volatile yet shorter term gains, will track the emergence of vibrant new champions and the property market as it finishes its adjustment back to its long term trend line will produce some excellent buying. If history tells us anything now, and over the remainder of this recovery period, we should be actively looking at what is on offer to purchase. These are times we look back on and say "If only I'd bought then".
To stay safe in property, lower your borrowing percentage, expect fluctuation and buy for the long term. As I cycle and look down from the hills above Christchurch and contemplate the risk associated with various markets, I can't go passed the fact that short of a five metre tsunami or an earthquake measuring 10, all of that lovely property below will still be there tomorrow. Can we say the same of all of the people and companies we invest in so heavily? Mind you, there's always global warming if we really need any more excuses to avoid action.
Footnote:
Tony Brazier has worked in the property industry for 23 years and owns a real estate company selling and managing residential and investment properties.
This columns information is of a general nature only. Readers should seek professional advice before acting upon it.
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