Tag Archives | Education

Playing safe might hurt in the future

Wye Creek038

 

Tom Hartmann, resident blogger at sorted.org.nz , recently posted about comparative risks in investment decisions. Specifically he looked at the classic ‘now risk’ vs ‘later risk’, or how “taking greater risks now means reducing them later, and vice versa: taking too small a risk now means it will loom larger down the line.”

With KiwiSaver, fund managers present these risks in different investment profiles from which the investor can choose to suit his or her preference. So growth assets like shares and property typically have greater returns in the long run but tend to have more volatility along the way than income assets like bonds or cash.

But for many investors the greater ‘now risk’ in the short term is outweighed by the ‘later risk’ of not having enough to reach their investment goals.

As Hartmann concludes: “Most of us have an allergy to risk – we naturally tend to put it off for the future. Somehow we need to overcome that.”

A discussion with us about your investment goals and our recommendations on how best to achieve them is a good place to start.

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Upside Downside

Upside downside

Reserve Bank LogoThe Reserve Bank has published an excellent guide to risk for savers and investors called “Upside, Downside”. It gives good practical examples of many of the common situations and effects that come from different types of investing. One of its most important themes is that taking on risk can be a good thing, particular for long term investors, or as Terence said in 150BC “Fortune favours the brave”. If you want a good background read to investing, this is a great place to start. Let us know if you have any questions regarding this publication or your investment once you have read the articles. The guide can be found at http://www.rbnz.govt.nz/publications/upsidedownside.pdf.

 

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