| Welcome to the April issue of the Select Wealth Management Dashboard Newsletter. I have to start by mentioning Tiger Woods performance at the Masters - his first major victory in 11 years. Quite a remarkable feat, and a great example of why I love sport so much. Against all odds, the veteran has proved all the nay-sayers wrong and returned to the winners' circle. Love him or loathe him, it is a remarkable sporting achievement.
Well, the first quarter has come and gone and it closes out a roller-coaster 6 month period. The last quarter of 2018 (October to December) saw awful returns in share markets. The American share market was down 12% for the quarter, Germany 11%, Australia 9% and Japan 17%. New Zealand fared much better down only 5%. The Morgan Stanley Composite Index (MSCI) is a measure of all global share markets (both developed and emerging countries), and is recognised as the best measure for global share markets in totality. This index was down 13% for the quarter. These are significant moves in anybody's language. But fast forward 3 months to the end of March, and you find that most of these markets have recovered the bulk of their losses. For example, America lost 12% for the December quarter and bounced 11% in the March quarter. Germany lost 11% and bounced 11%; Australia lost 9% and bounced 9%; the MSCI index lost 13% and bounced by 13%. These are unusually volatile moves and quite remarkable. The most interesting point about these moves is a mathematical anomaly that many people are unaware of. This is the fact that even though markets bounced by as much as they fell, they are still not quite back at the level that they started at. To illustrate this point, consider the following: If you start with $100 and you loose 13% of it, you are down to $87. The maths is simple - 13% of $100 is $13, so $100 -$13 = $87. Now when you recover 13% on your $87, you only get $11.31 back (13% of $87 is only $11.31). Add this $11.31 to your $87, and you end up with $98.31 - not $100. The same principle applies to the markets. You actually have to recover slightly more than you lost in order to get your full $100 back. This anomaly is the reason why Warren Buffet's number 1 rule for investing is "Don't lose money". This anomaly is also the reason why at Isaacs Financial Planning we have a bias toward "active managers". We believe that a good active manager is better equipped to minimise losses in a "down market" relative to a passive alternative - something that was evidenced at the end of last year. (It is worth mentioning that we use both active and passive managers, we simply have a bias towards active). All said and done, the end result is that your March reports for your portfolio (which are now available) will be far more enjoyable reading than your December one was. The 1st of April also saw a few changes introduced to KiwiSaver. These were minor changes summarised as follows:
The 1st of April also saw the Government Superannuation go through its annual inflation adjustment. The payment for a married couple who both qualify went up from $616.72 per fortnight each to $632.54 each - an increase of $15.82 per fortnight each. Whilst this doesn't sound a particularly material amount, it is important to remind ourselves that this universal superannuation benefit is an amazing privilege that most countries would be extremely envious of In terms of the markets, the past 30 days have been very strong. Most share markets are up, Hong Kong, London, Germany and New Zealand by as much as 4%. House values eked up again slightly, and term deposit and mortgage rates continue to eke down slightly. Remarkably, ASB's 3 year mortgage rate in now lower than their 1 year rate - an inversion that we haven't seen for many years. Similarly, 2 year term deposits rates now offer less than their 1 year counterpart. If you didn't already believe that low rates are here for longer, this inversion should be all the evidence required to convince you. Here are the numbers: |
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In terms of your Select Wealth Management portfolio, your March quarter performance reports are now available for viewing. As I mentioned, performance was very strong for the quarter. The extreme volatility of the past 6 months has made for a bumpy ride, and it would be easy to lose sight of longer term performance under these circumstances. But your March report will illustrate that as at 31 March 2019, most portfolios have enjoyed 10 years of very good performance. Finally, a quick update on our Giving Back program for Loren Harvey. We are slowly chipping away at our target of $2,500 to buy Loren the ultimate baking package experience. You can learn a bit more at www.mifinancialplanning.co.nz/giving-back.html . As always, thank you so much for the referrals of your friends and family - keep them coming... Warm regards Dave and the team at Isaacs Financial Planning dave@mifinancialplanning.co.nz |
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This newsletter is intended for general distribution and does not constitute personal financial advice. Copy of my primary disclosure statement and secondary disclosure statement.