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  1. #71
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    Quote Originally Posted by SBQ View Post
    I'll have to admit i'm not in a NZ position to invest in Kiwi Saver as my wife would be. Fortunately my father lives abroad where we can manage our investments jointly. So our NZ household savings take a different path ; which i've strongly advised the wife not to join Kiwi Saver. If there were prospecting shares (or managed funds) in NZ that would be attractive, we would of done so. But for the past 15+ years, we've pretty much done better by simply buying none other than "Berkshire Hathaway".

    Most people in NZ have never heard of the company. They don't even know who Warren Buffet is. But time and time again Buffet has said you're playing a fools game if you can time markets when to buy or sell or know when to be in cash or bonds (hence the behaviour actively managed funds practice). He says, "That's not how you get rich in this industry... you can't tell your clients to go put their $ in the index fund because how else would they (the financial advisors) get paid? .. That's not how the system works".

    From a performance point of view, tt's a shame that the default Kiwi Saver funds 'net of fees' isn't doing any better than what the banks pay in term deposit. Of course, interest income is taxed at marginal tax rates but on a cumulative basis it might be very comparable? I recall during the Hanover Finance era banks were paying over 9% on term deposits.
    I have heard of Berkshire Hathaway - despite their history they haven't done any better than the S&P500 over the last decade at least. Their size is such that they're unlikely to outperform going into the future (especially as their secret sauce is likely to retire/die soon). Buffet himself has said on his death he will advise his wife to invest in the cheapest share tracker she can find. If your wife is able to get employer matching, you will not find an easier way to outperform. Even if not, may as well stick $1k in each year and get the member tax credit. The only downside is your money is locked up until 65, which is why I put in a minimum required to get the benefits and any extra cash goes elsewhere.

    I agree, the default funds are not doing very well - I guess the decision was made to assume people want a conservative fund by default, so the default funds are in invested in about 80% cash and bonds. Sadly only a minority will ever question this and stick their money somewhere more appropriate.

  2. #72
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    As SBQ said, kiwis have invested heavily in real estate as most of the gains came from untaxed capital gains. Real estate whether owner-occupied or investor still forms the backbone of retirement savings.

    Perhaps the the reason why real estate gains have not been taxed was as a result of the political influence of farmers with their land wealth and the desire not to force the break up of large farms?

    Excluding the primary residence from any CGT will increase the relative appeal in NZ of using the family home as the pension plan - Especially in the absence of providing further tax incentives to invest in KiwiSaver (apart from the $521 annual credit on annual contributions over $1042 no matter how large the balance and how large the PIE tax payable on the balance each year.)
    Last edited by Bjauck; 18-02-2019 at 01:54 PM.

  3. #73
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    Quote Originally Posted by mfd View Post
    I have heard of Berkshire Hathaway - despite their history they haven't done any better than the S&P500 over the last decade at least. Their size is such that they're unlikely to outperform going into the future (especially as their secret sauce is likely to retire/die soon). Buffet himself has said on his death he will advise his wife to invest in the cheapest share tracker she can find. If your wife is able to get employer matching, you will not find an easier way to outperform. Even if not, may as well stick $1k in each year and get the member tax credit. The only downside is your money is locked up until 65, which is why I put in a minimum required to get the benefits and any extra cash goes elsewhere.

    I agree, the default funds are not doing very well - I guess the decision was made to assume people want a conservative fund by default, so the default funds are in invested in about 80% cash and bonds. Sadly only a minority will ever question this and stick their money somewhere more appropriate.
    There is no secret sauce. Buffet's been able to beat the S&P500 10 out of the past 13 years:

    https://www.fool.com/investing/2019/...he-last-1.aspx

    Total Return BRK: 247.8% Annualized Return: 7%Total Return S&P500: 164% Annualized Return: 3.8%

    Buffet has mentioned many times to his shareholders that Berkshire's large size is an issue. But that's not how Buffet beats the market. Berkshire is not a company that can be compared to other mutual / managed or hedge funds, and this is where Kiwi Saver funds really fall short. They simply can't 'broker deals' like Berkshire can. Good examples was when the 2008 GFC hit, no one had $ to be bailed out. When Goldman Sac wanted money, where did they go? When GE wanted money, where did they go? They knocked on Buffet's door step asking for $ and in classic style, Buffet named his terms. 10% p.a. + options or convertible warrants or preferred shares. These kinds of deals managed funds don't have the ability to do or simply, are not in the loop of things. Buffet is also famous for conveying deals that require large amounts of $. Such as Burger King moving to Canada (to buy out Tim Hortons). Kraft Foods, Mars Confectionary, 3G. When one major corporation doesn't have the funds to buy out another, they usually knock on Buffet's door.

    No one really knows the performance of Berkshire after Buffet is gone. But we are assured that succession plans are already in place and in Buffet's last years, he would simply let the younger managers take place and make sure the Berkshire culture remains within. It's a lot different to how Finance companies or managed funds operate where they may cycle through many different managers to tweak things in their portfolio throughout the years.

    I'm hoping my wife understands my approach to investing and why i'm hesitant to Kiwi Saver. She knows that NZ may not be our home for the long term and there may be a good possibility our children may move abroad. So being locked into Kiwi Saver until we're 65 is not something in our books.

    One thing for certain, no one really knows what the future will hold.

  4. #74
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    Quote Originally Posted by Bjauck View Post
    As SBQ said, kiwis have invested heavily in real estate as most of the gains came from untaxed capital gains. Real estate whether owner-occupied or investor still forms the backbone of retirement savings.

    Perhaps the the reason why real estate gains have not been taxed was as a result of the political influence of farmers with their land wealth and the desire not to force the break up of large farms?

    Excluding the primary residence from any CGT will increase the relative appeal in NZ of using the family home as the pension plan - Especially in the absence of providing further tax incentives to invest in KiwiSaver (apart from the $521 annual credit on annual contributions over $1042 no matter how large the balance and how large the PIE tax payable on the balance each year.)
    The CGT will just simply level the investment playing field. The reason why CGT is so hard to push through is simply, we have too many NZ politicians that own real estate. I hear Winston Peters owns like a dozen houses in his portfolio and isn't a fan of this CGT. So it would be interesting to see how serious these politicians will be when it comes implementing CGT and hopefully, it would encourage more people to invest in other areas of finance (which is more productive).

    In Canada and i'm quite certain in the US. Farmers owning land is treated differently. They allow exemption of taxes when passed down to next generation after death. I don't see why NZ couldn't do the same. All I hear is excuses how complicated taxes will be in NZ when other countries have managed fine with concessions or exemptions. Like GST exemption of food? In this day of age of computers, can it be that difficult?

  5. #75
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    Quote Originally Posted by SBQ View Post
    There is no secret sauce. Buffet's been able to beat the S&P500 10 out of the past 13 years:

    https://www.fool.com/investing/2019/...he-last-1.aspx

    Total Return BRK: 247.8% Annualized Return: 7%Total Return S&P500: 164% Annualized Return: 3.8%

    Buffet has mentioned many times to his shareholders that Berkshire's large size is an issue. But that's not how Buffet beats the market. Berkshire is not a company that can be compared to other mutual / managed or hedge funds, and this is where Kiwi Saver funds really fall short. They simply can't 'broker deals' like Berkshire can. Good examples was when the 2008 GFC hit, no one had $ to be bailed out. When Goldman Sac wanted money, where did they go? When GE wanted money, where did they go? They knocked on Buffet's door step asking for $ and in classic style, Buffet named his terms. 10% p.a. + options or convertible warrants or preferred shares. These kinds of deals managed funds don't have the ability to do or simply, are not in the loop of things. Buffet is also famous for conveying deals that require large amounts of $. Such as Burger King moving to Canada (to buy out Tim Hortons). Kraft Foods, Mars Confectionary, 3G. When one major corporation doesn't have the funds to buy out another, they usually knock on Buffet's door.

    No one really knows the performance of Berkshire after Buffet is gone. But we are assured that succession plans are already in place and in Buffet's last years, he would simply let the younger managers take place and make sure the Berkshire culture remains within. It's a lot different to how Finance companies or managed funds operate where they may cycle through many different managers to tweak things in their portfolio throughout the years.

    I'm hoping my wife understands my approach to investing and why i'm hesitant to Kiwi Saver. She knows that NZ may not be our home for the long term and there may be a good possibility our children may move abroad. So being locked into Kiwi Saver until we're 65 is not something in our books.

    One thing for certain, no one really knows what the future will hold.
    13 years is a strange timeline. Here's my source

    https://seekingalpha.com/article/415...vs-s-and-p-500

    Looks like they did well around 2007 which bumps up your quoted 13 year returns. The trend is pretty clearly towards matching the market in the future, as you'd expect as the size of the company increases. Not a terrible place for your money, but don't expect the future returns to look like the past.

    I can fully understand not wanting to be in kiwisaver if it's too inflexible. On a pure financial returns basis, I will take it over Berkshire anyday due to my employer and the tax man more than doubling all my contributions.

  6. #76
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    Quote Originally Posted by mfd View Post
    13 years is a strange timeline. Here's my source

    https://seekingalpha.com/article/415...vs-s-and-p-500

    Looks like they did well around 2007 which bumps up your quoted 13 year returns. The trend is pretty clearly towards matching the market in the future, as you'd expect as the size of the company increases. Not a terrible place for your money, but don't expect the future returns to look like the past.

    I can fully understand not wanting to be in kiwisaver if it's too inflexible. On a pure financial returns basis, I will take it over Berkshire anyday due to my employer and the tax man more than doubling all my contributions.
    The author's can pick the timeline to suit what every spin they want, also I would question where that SeekingAlpha link gets it's data from as their chart doesn't seem to reflect what I posted.

    The employer matching of contributions is not always double. The minimum is 3% of person's income and the employer doesn't have to match any higher if the employee chooses to contribute more (up to 8% - a far cry from 18% that Canada allows).

    My notion is at the minimum, the 3% matching contributions can easily be eaten up by the fund's mgt fees and this you lose out on compounding returns. More importantly, contributions only come if you're employed. What does that leave to those with disabilities or on the benefit? This is why I wonder if the NZ gov't would of been better to boost their superannuation pension fund by directly buying the S&P500 index so that everyone will see the benefit at retirement. Not just those that are able to work.

  7. #77
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    Quote Originally Posted by SBQ View Post
    The author's can pick the timeline to suit what every spin they want, also I would question where that SeekingAlpha link gets it's data from as their chart doesn't seem to reflect what I posted.

    The employer matching of contributions is not always double. The minimum is 3% of person's income and the employer doesn't have to match any higher if the employee chooses to contribute more (up to 8% - a far cry from 18% that Canada allows).

    My notion is at the minimum, the 3% matching contributions can easily be eaten up by the fund's mgt fees and this you lose out on compounding returns. More importantly, contributions only come if you're employed. What does that leave to those with disabilities or on the benefit? This is why I wonder if the NZ gov't would of been better to boost their superannuation pension fund by directly buying the S&P500 index so that everyone will see the benefit at retirement. Not just those that are able to work.
    Technically I agree, high fees could eat up the contributions. However, if I do a back of the envelope calculation of a 7% return without matching, versus a 6% return with employer matching (1% fee, so three times what I pay), the matched scenario wins until you get to 90 years from your first contribution. In reality, the matching far outweighs the cost of the fees. Even a 2% fee wins for 50 years.

    As I said, I only contribute 3% as that is all that is matched. Savings above this go elsewhere. If the matching increased, I would put in more to maximise this

    Fully agree the system is not well setup for those who don't earn much or don't work at all, but that doesn't change my response to the incentives.

  8. #78
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    My Kiwisaver started in early 2010. 100% cash fund. I feel like I should adjust my kiwisaver now. Is it wise to keep 100% cash? Are there any risks?Thanks in advance.


    Last edited by Valuegrowth; 21-03-2020 at 09:52 PM.

  9. #79
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    Quote Originally Posted by Valuegrowth View Post
    My Kiwisaver started in early 2010. 100% cash fund. I feel like I should adjust my kiwisaver now. Is it wise to keep 100% cash? Are there any risks?Thanks in advance.
    Are you pulling my leg as your name doesn't suggest someone who would be in cash mr valuegrowth

    With the power of hindsight I would have suggested a growth fund from 2010 to Dec 2019 and then a move to cash.

    Cash right now to me would seem the best option but it will depend on what central banks do. they have been working hard to debase currencies to clear debts but have been unsuccessful so far. I am not wise so take my ramblings with a grain of salt I would suggest a move to growth or balanced fund might be good sometime in the future but not yet as the virus might only be the pin that pricks the debt bubble. I believe the debt bubble is what the financial markets are really scared of.
    https://www.theguardian.com/world/20...ggle-with-debt

    Personally my Kiwisaver will remain ultra conservative unless we go to negative interest rates or suggestions of a currency crisis.
    When to move to growth is impossible to know but personally I don't think it is just yet.

  10. #80
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    Thank you so much Aaron for your great Advise. Now I feel I am going to get opportunity to re-adjust my kiwisaver. I have few options. One is high growth. Other one is balanced. I am also thinking about kiwisaver funds which allow us to pick individual companies to invest or a very aggressive fund. As it is kind of retirement fund, I would think about margin of safety as well. As you suggest, balanced or growth seems to be good option.
    Last edited by Valuegrowth; 22-03-2020 at 03:11 PM.

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