| Welcome to the March issue of the Select Wealth Management Dashboard Newsletter. As I write this newsletter, the word that keeps coming to mind is "ugly" - it's the only word I could think of to fairly describe the past month. The situation in Ukraine - ugly. The number of Covid cases - ugly. The performance of share markets - ugly. The price of petrol (and many other goods for that matter) - ugly. It really has been a very shaky start to the year.
All of this ugly has resulted in some very painful performance from investment portfolios. In fact, in New Zealand, there is close to the perfect storm. Share markets around the world have fallen another 3% to 17% (depending on which market you look at) over the past month. On top of that, the NZ$ has strengthened against peers by between 1% (AUD$) to as much as 7% (GBP). This is great if you're going on an overseas holiday, but terrible if you own overseas investments (like global shares). So any share market exposure has had a double whammy. What about fixed interest then? Well, interest rates in New Zealand have continued to rise over the past month. Rising interest rates have a negative impact on the value of fixed interest contracts (bonds), so even fixed interest investments have had strong headwinds and fallen in value so far this year. The bricks and mortar of property - surely that's immune? Apparently not. Rising interest rates and tightening credit conditions has put the hand break on property activity too. Anecdotal evidence is that property prices have fallen 5% - 10%, and that's certainly what I've noticed in some of the listings that I have been following on TradeMe in my area. So all said and done, investment portfolios are under as much strain now as they have been for a very long time. There really has been little place to hide. This has been the first time in a long time that investors have had to deal with negative returns. There was the market correction back in 2020 when the Covid pandemic first kicked off, but the bounce-back was so fast that most people didn't even notice their investments had fallen in value. This is different. This time you will get a quarterly or annual statement that actually shows a fall in value - nobody likes that. I've had 20 years' experience doing this job, and I still don't like seeing negative returns. But, as I have said so many times before, this is all part of investing, and nothing to be alarmed by. If you have a robust financial plan and have done proper risk profiling, your portfolio will still be within its return expectations, and you will still achieve your long term goals. At the end of the day, that's all that matters. The rest is "white noise". I heard a great catchphrase the other day - "When in doubt, zoom out". Setting aside the start to this year, the past 10 years have been extra-ordinary. They really have. If you owned any asset at all, it has increased in value. Owned a home - it doubled in value. Owned some shares - doubled in value. Owned Bitcoin - through the roof. Owners of assets enjoyed an exponential increase in net worth, while those that didn't own assets fell further and further behind. As asset owners, I fear that we have grown so accustomed to our net worth increasing organically that we are at risk of taking it for granted. This is a timely reminder that it's not always plain sailing, and that sometimes there will be bumps in the road. Our resolve, patience and nerves will be tested. It is unreasonable for us to expect our assets to simply continue to increase in value exponentially indefinitely - that's not sustainable. When in doubt, zoom out. We've had a great run, and we can bank that. But I sense that the next few years will be far more challenging, and we need to re-calibrate our expectations accordingly. Gone are the days of "easy returns". Now are the times for grinding out modest gains and working hard for every dollar of gain. Now is the time that your Financial Planner really has to earn their salt. And I can assure you that at Makowem & Isaacs Financial Planning, we are doing all we can to rise to that challenge. When we "zoom out" and reflect again in 10 years time, we want to ensure that we can celebrate another decade of success with our clients. Here are the numbers for the past 30 days: |
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In terms of your Select Wealth Management portfolio, we met (virtually) with researchers JMI Wealth last month to review the investment menu. At this stage, there is no change to the menu of investments available - all fund managers continue to perform as expected. There are some nuisances with a bias towards New Zealand Fixed Interest over Global Fixed Interest, and value stocks over growth stocks, but no wholesale changes are required at this stage. Your performance reports for the period to 31 March will be out in the second week of April. Short of a miraculous market rally between now and 31 March, the performance number for the quarter is going to be ugly. However, portfolios are robust and continue to perform as expected under the circumstance. All portfolios are well within the expected return parameters. If you have questions about your performance report or want to meet to review your portfolio, please do not hesitate to contact me - we are here to help. Finally, a quick update on our HUHA (Helping You Help Animals) Giving Back program. We've had a pretty slow start to the campaign, and have currently raised just over $400. But I'm sure we'll make up for this in the next few months and be able to make a meaningful contribution to this fabulous cause. To keep track of the Giving Back program visit https://mifinancialplanning.co.nz/giving-back.html As always, thank you for your continued support by introducing friends, family and colleagues to our business as prospective clients - I can't thank you enough. Warm regards Dave and the team at Makowem & 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.