RP Wang Investment

This article provides some straightforward answers to some of the most often asked questions from people who are new to investment.

What is fixed interest?
Fixed interest describes fixed term deposits like bank deposits, cash management accounts, debentures as well as bonds like government stock and company bonds. Fixed interest investments pay interest, usually every six months or quarterly. On maturity the investor is paid back what they invested. Fixed interest is a very good investment, especially for people looking for a low risk investment and a reliable source of income. The major disadvantage with fixed interest is that the returns from it are relatively low and therefore it provides little protection against inflation.

What are equities?
Equities is another name for shares. The word equity is derived from the latin word aequitas, meaning equal ownership. This aptly describes shares, which are essentially part ownership of a company. For instance, if a company has 100 shares in total and you own 10 shares, you own 10% of that company.

Why does everyone worry about inflation?
The goal of investment is to ensure you can maintain your standard of living in 20 or 40 years time. To do this, the value of your savings must rise at least in line with inflation, which really is just a measure of how much prices are rising.

What is a balanced portfolio?
We often advise people that if they do nothing else, at least diversify. A balanced portfolio is nothing more than a spread of investments. List all your investments under four headings: fixed interest, local shares, overseas shares and property. You should have some money invested in each. How you split your funds between each sector depends on your appetite for risk, how long you are investing for and your investment goals. Your investment adviser can help you make these decisions.

How do I avoid fraudulent or dubious investments?
The old adage that “if it sounds too good to be true, it usually is” is a very, very useful rule when it comes to investing. Over the long term,equities provide a return of around 8% per annum, fixed interest around 6% and property around 9%. Be very wary of investments that advertise far higher returns than this. The biggest mistake new investors often make is to be lured to fast returns. Be very honest with yourself when considering investments; ie. recognise when greed is taking over your decision making! It is a good idea to seek professional advice before jumping into an investment. Remember, it’s your money and there is no need to rush into any investment.

Why do some people invest outside New Zealand?
Not only is New Zealand the very best country in the world, it is also one of the smallest. Our economy and share market are relatively vulnerable, as is our currency. It is sensible to therefore have some funds invested outside New Zealand, especially as most of the goods we buy every day are either imported or priced by forces outside New Zealand, therefore a lower New Zealand dollar makes overseas goods more expensive.Investing funds offshore helps to smooth out the impact of movements in the currency.

Everyone talks about the long term – what is the long term?
When investing in growth investments like equities you need to give them time to work for you. Shares go up and down in the short term but over the long term this volatility smoothes out. The long term should be at least 20 years. This may sound awfully long, but consider if you are 40 years old and are investing for your retirement, you could easily be a holder of your shares for 40 years or more.

By: Cam Watson

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During these tough economic times, many investors are starting to panic. They’ve lost trust in the stock market but have no idea where to put their money. The problem is that many investors think their only investment option is the stock market. They may view alternative investment opportunities, take real estate for an example, as too risky. The bottom line is that they want their investments to be safe and smart, yielding positive results both now and in the future. After all, many of these investors are putting their life savings on the line.

In the face of such unsure times, there is a sound solution: invest your money in gold and other precious metals. No matter what part of the world you call home, gold is a safe investment. According to NBI (National Bullion Investors, LLC), “Gold prices will rise next year as the financial crisis pushes more investors into the precious metal safe haven.” In fact, the gold industry expects bullion prices to hit $958.6 per troy ounce by November of 2009. Considering that current prices hover around $902 per ounce, we’re looking at a hefty increase if trends remain the same over the next year.

For the past ten years, Alan Greenspan, the widely respected former chairman of the US Federal Reserve, has touted the wisdom of investing in gold. He predicted that fiat money would someday be worthless but commented that, “Gold is always accepted.” More and more investors, from the middle class to the very wealthy, are beginning to share his sentiments.

Jeremy Charles, the head of precious metals at HSBC in London, noted that many investors were turning to gold as their confidence in the U.S. dollar is shaken. Don’t expect this to be a temporary fix, though; Mr. Charles believes that we’re facing a structural change in the way people approach their investments. He states that even after the current credit crisis comes to an end, gold will be viewed differently. “High bullion prices are here to stay,” he declared. Meaning that gold will continue to be a wise investment option for many years to come.

According to FT.com, which recently covered an annual London Bullion Market Association meeting in Tokyo, some bankers are so worried about the security and stability of the financial system that they are putting their money into physical gold, which involves taking possession of bullion bars and coins and thus removing their investment from the financial system. Because of this high demand for gold coins, dealers worldwide are actually running out of stock of popular coins.

Now, more than ever, is the time to sit down with your portfolio and reconsider your investment needs. Open your mind to new opportunities and think about diversifying your investments. If you’re a bit uncomfortable with putting all of your money in gold, that’s okay; you can start off slow, putting 10 or 15% into the precious metal. Remember, gold is much more than the material that you wear around your ring finger; it’s actual money that can pad your savings account and help build your wealth.

By: Ron Wellman

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