| Welcome to the March issue of the Select Wealth Management Dashboard Newsletter. Ever heard the saying "the rich get richer, and the poor get poorer"? I'm not sure I entirely agree with this, but there certainly is an element of truth to it. It becomes more evident during economically challenging times - like what we've experienced in the past few years.
Did you know that in December 2023 and January 2024, there were more "Financial Hardship" withdrawals from KiwiSaver than there were "First Home Buyers" withdrawals. It's the first time in KiwiSaver's 17 year history that this has happened. It's important to realise that the hurdle for a Financial Hardship withdrawal is really high. This is not a simple case of the applicant being a bit tight at the end of the month - this is serious financial hardship resulting in potential eviction or mortgage enforcement. The number of Financial Hardship withdrawals steadily increased from 970 per month in January 2022 to 3,450 per month by the end of 2023. So more and more "poor" people were withdrawing from their KiwiSaver accounts during 2022 and 2023. This was an extremely inopportune time to withdraw as the markets were at the bottom of the cycle - and that loss is now locked in for the "poor" people, never to be recovered. According to Centrix, mortgage arrears are at 4 year highs too. Between the high cost of living and rising mortgage rates, people are falling behind on their mortgage payments. This often leads to forced sales of properties. And we all know that our properties aren't worth today what they were a few years ago. So clearly a forced sale now is also not ideal. Once again, the "poor" lock in their losses. On the flip side of this, who are the beneficiaries? It's typically the "rich" who are buying the properties and investing more in their KiwiSaver (or equivalent) investments. So they're picking up all the bargains and locking in future gains. So in it's simplest form, that's how the rich do get richer during tough times. You can extrapolate this out to any number of situations - the struggling retailer having to fire sale stock, the fatigued business owner selling the business at a discounted price, the cruise ship company virtually giving away holidays... All the while, those with dry powder (the "rich") keep locking in good deals and future gains - sometimes without even realising it. I enjoy asking people what they think my job is as a Financial Planner - what they think it is that I spend most of my time and energy on. More often than not, the answer has something to do with investment returns - something like studying the markets or economic climate, looking for the best returns, learning about Bitcoin - all spreadsheets and numbers. Whilst these are all an important part of my job, it is not the area where I can make the biggest impact on my clients' financial wellbeing. Most of my energy is concentrated on trying to ensure that my clients don't ever find themselves in the position where they are the "poor" people - the ones with no dry powder. This is never as exciting as Bitcoin or sexy investment returns, but it is the best way to ensure wealth protection, and avoid wealth destruction. The fact is that none of it is rocket science either - avoiding wealth destruction is really just a combination of common sense and discipline. Simple things that make all the difference include:
A good Financial Planner will help their clients do this stuff consistently over a long period of time - possibly a lifetime. That will almost certainly create wealth and ensure that you remain one of the "rich" people - or at the very least avoid becoming one of the "poor" people. In terms of the markets, the past 30 days have been fairly muted for share markets. The German and Asian markets were strong, and Australaia and and America eked out modest gains. New Zealnd's OCR (Official Cash Rate) remained unchanged at 5.5% on 28 Febraury (as expected), but the currency market reacted with the NZ$ weakening against trading partners by about 1 ½%. The Federal Reserve meet tomorrow to review the FED rate in the USA, and the expectation is for rates to remain unchanged. Commentators are more interested to hear if FED chair Jerome Powell gives any hints as to when the first rate cut will be. Share markets are very sensitive to his comments at the moment, and could either rally or fall based on his interest rate guidance. Markets are desperate for that first rate cut! Here are the numbers for the past 30 days: |
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In terms of your Select Wealth Management portfolio, we are fast approaching the end of the first quarter, and the end of the financial year. As such, you will get your tax report and performance report next month. Performance remains in line with expectation, and we remain comfortable with the fund managers we currently have exposure to. Finally, a quick update on our Giving Back program for Ellie's Rescue and Rehome. As we approach the half way mark of the campaign, we have raised about $1,000 so far towards this great cause. Hopefully we have a good run over the next 3 months to reach our target of $2,500. As always, thank you so much for the introduction to your family and friends to allow us to continue this initiative - we really appreciate it. To keep track of the Giving Back program visit https://mifinancialplanning.co.nz/giving-back.html That's all for now. Chat again soon 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.