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  1. #16
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  2. #17
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    Thanks for mentioning this and the Stuff article. The main points are that sure a fund may be doing well but when the music stops and it will, you will take a huge haircut in your invested capital.

    The funds that are performing above benchmarks need to as the risk is higher than a fully liquid fund with similar performance.

    If you have second thoughts and try and withdraw when there is a run on the fund this is when losses will be crystallised.

    I think what people need to consider is diversifying their invested capital between a few structures and also asking themselves how they would react if there is a run on the fund. Ideally you would remain but there is huge uncertainty in the value of the remaining units.

    I suggest diversifying between different structures, looking at 10y performances, % held in what companies and being ruthless if the fund is looking average. This is because the risk profile is higher than a more conservative fund.

  3. #18
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    this doesn't really apply to KiwiSaver funds though. They will almost certainly never experience a massive run because people cant withdraw until 65. Or, even if say one particular fund has a huge number of transfer requests outwards it would never be like a full scale run because most people don't take that active an interest in their KS.

    Which is kind of a good thing about KiwiSaver for the average person who may well be inclined to liquidate their losses during a financial crisis scenario (if they are able to).
    For clarity, nothing I say is advice....

  4. #19
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    Quote Originally Posted by peat View Post
    this doesn't really apply to KiwiSaver funds though. They will almost certainly never experience a massive run because people cant withdraw until 65. Or, even if say one particular fund has a huge number of transfer requests outwards it would never be like a full scale run because most people don't take that active an interest in their KS.

    Which is kind of a good thing about KiwiSaver for the average person who may well be inclined to liquidate their losses during a financial crisis scenario (if they are able to).
    My understanding is funds like Milford Growth Fund that are 'mirror' images of Kiwisaver growth fund with a higher proportion of unlisted investments then it could affect their returns?

  5. #20
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    Quote Originally Posted by kiora View Post
    My understanding is funds like Milford Growth Fund that are 'mirror' images of Kiwisaver growth fund with a higher proportion of unlisted investments then it could affect their returns?
    well my point is that liquidity requirements are less likely to affect a KS fund.
    Any non KS mutual fund will potentially have returns affected by liquidity in the usual way which is : being able to accept lower liquidity can potentially increase returns (as long as you're not forced to liquidate at a bad time).
    I understand this is called a liquidity premium.
    And the converse is true that if you require high liquidity your investments will likely have lower returns.
    For clarity, nothing I say is advice....

  6. #21
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    Quote Originally Posted by Schrodinger View Post
    Thanks for mentioning this and the Stuff article. The main points are that sure a fund may be doing well but when the music stops and it will, you will take a huge haircut in your invested capital.

    The funds that are performing above benchmarks need to as the risk is higher than a fully liquid fund with similar performance.

    If you have second thoughts and try and withdraw when there is a run on the fund this is when losses will be crystallised.

    I think what people need to consider is diversifying their invested capital between a few structures and also asking themselves how they would react if there is a run on the fund. Ideally you would remain but there is huge uncertainty in the value of the remaining units.

    I suggest diversifying between different structures, looking at 10y performances, % held in what companies and being ruthless if the fund is looking average. This is because the risk profile is higher than a more conservative fund.
    Errr.... when its not doing well you want to be buying more... why the F would you withdrawal at the worst possible time? if your'e emotionally driven and will follow the sheep when everything adjusts and want to bail cause your'e scared theres always term deposits.

  7. #22
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    Quote Originally Posted by alistar_mid View Post
    Errr.... when its not doing well you want to be buying more... why the F would you withdrawal at the worst possible time? if your'e emotionally driven and will follow the sheep when everything adjusts and want to bail cause your'e scared theres always term deposits.
    If you actually read the commentary we are talking about portfolio risk and what happens when the market turns - these funds need to be performing high and you technically have zero liquidity if there is a run. The conversation is about portfolio risk and not about if you favour term deposits v funds.

  8. #23
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    "Here’s what smart rich people really do with their nest Egg"
    //www.marketwatch.com/story/heres-what-smart-rich-people-really-do-with-their-nest-egg-2018-07-11?siteid=yhoof2&yptr=yahoo

  9. #24
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  10. #25
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    " S&P returns for the coming decade — many suggesting between 0 – 4% average returns per year."
    https://finance.yahoo.com/news/not-225720937.html
    "there’s going to be a growing discrepancy between tech returns and average market returns."
    " But now, there’s potentially 15 iPods coming."
    "From Dalio:

    The worst thing one can do, especially late in a paradigm, is to build one’s portfolio based on what would have worked well over the prior 10 years, yet that’s typical.

    With this in mind, as you look at your portfolio, is it built upon the broad-market gains of yesterday? Or it is primed for the tech-explosion of tomorrow?

    Technology will be the single greatest wealth divider in the United States over the next ten years. You can either ride it higher or be run over by it."

  11. #26
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    @ klora:

    Or one could just buy the broad market index ETF. This game for managed fund managers of picking the right stocks is for the dogs. Some may beat the index return in the short term but well over 99% of the 10,000 funds globally never do. But what am I to say? We have the NZ gov't and the financial institution rearing for max commission and fees (not to mention the amount of tax IRD makes from Kiwi Saver) which is all at a loss to the investor when compared to other investments.

  12. #27
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    Quote Originally Posted by kiora View Post
    " S&P returns for the coming decade — many suggesting between 0 – 4% average returns per year."
    https://finance.yahoo.com/news/not-225720937.html
    "there’s going to be a growing discrepancy between tech returns and average market returns."
    " But now, there’s potentially 15 iPods coming."
    "From Dalio:

    The worst thing one can do, especially late in a paradigm, is to build one’s portfolio based on what would have worked well over the prior 10 years, yet that’s typical.

    With this in mind, as you look at your portfolio, is it built upon the broad-market gains of yesterday? Or it is primed for the tech-explosion of tomorrow?

    Technology will be the single greatest wealth divider in the United States over the next ten years. You can either ride it higher or be run over by it."
    The message here is that you should, abandon your previous balanced portfolio allocation and go all in on tech? Those you survived the 'dot com' boom of the early 2000s would probably have something to say about that strategy. I can say with certainty that selling up and buying into the up and coming tech companies now would almost certainly lead to complete financial disaster for the portfolio of any investor for the following reasons:

    1/ No-one knows which of the leading tech companies today will be the market makers of tomorrow. Twenty years ago the leading search engine on the net was something called 'Altavista'. If you had poured all your savings into that 'back then', you would have nothing now. Yes there are those who have done well by picking today's winners in advance. But this is success measured in hindsight, which means the investment risk has been eliminated. It gives a false picture because you can't eliminate investment risk at the start of the investment process.

    2/ Popular tech shares are often priced at premium prices by the market. Many may never even make a profit. The one rule of investment that stands the test of time is that any share is valued at the present value of its future cashflows. If a share cannot see a way to generate positive cashflows, then in the long term it is worthless. Because tech is the flavour of the moment, that means some investors are prepared to wait years for cashflows to turn positive. But during those years these up and coming companies are subject to execution risk and competitive pressures. Many don't make it.

    3/ The popular belief that to benefit from tech you have to invest in tech is false. There are many old school companies like banks and airlines who have used tech to reinvent their work practices and greatly reduce their cost base. Tech can benefit the old school companies too!

    Yes S&P returns may only average 0-4% for the next few years. But that will be far better than embarking on some hair brained tech chase that will more than likely destroy 80% of your capital.

    SNOOPY
    Last edited by Snoopy; 29-11-2019 at 07:56 PM.
    To be free or not to be free. That is the cash-flow question....

  13. #28
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    " S&P returns for the coming decade — many suggesting between 0 – 4% average returns per year."

    and what is the trend on interest rates for cash deposits? In a place where interests are doing to 0 (with some places around the world with negative interest rates) there really isn't much option to choose?

    and this is the fundamental flaw with Kiwi Saver (or pools of managed funds within the same family). They promote investment risk in terms of 3 categories (conservative / balanced / aggressive) and the measure of the risk level is based on a % proportion of the funds in cash (bonds) / equity ratio. That is 'aggressive growth' has most of the assets held in equities with little cash TD or bonds. While a risk adverse 'very conservative' approach has assets mostly invested in cash TD with little exposure to shares. Why are NZ investment advisors not advising clients on the growing global trend of lower interest rates? Perhaps they don't care and sell on the assumption that it doesn't matter because either way, they collect commissions. Never i've seen investment advisors complain and fault themselves of the poor decisions they've made, when a client sits in their office asking for an explanation. They have very good excuses based on hindsight 20/20, but never fault a mistake directly on themselves. This is very different to the CFP in N. America where they're more accountable to their clients. The CFP has to not only know about all different asset classes for investment, but also need extensive knowledge for taxation. In NZ, the advisor separates taxation with investment because as they've told me time and time again "you'll need to seek a tax specialist for that question". When you're talking investments in any way, taxation MUST be part of the equation and therefore a criteria when looking at any portfolio composition.

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