Are Kiwi investors overly exposed to the New Zealand economy
Many New Zealanders could be putting their investments at risk by focusing too much on the local economy.
Kiwi Wealth’s State of the Investor Nation report found that 71% of New Zealanders don’t believe they have a diversified portfolio, with the most common investments being property, KiwiSaver, savings accounts and term deposits.
Joe Bishop, Kiwi Wealth General Manager Customer, Product and Innovation, said the findings indicated Kiwis were overly exposed to the New Zealand economy.
“On one hand the data paints a healthy picture of New Zealand investment landscape. Kiwis are saving more and investing money. They understand concepts like risk profile and diversification pretty well. That’s a good thing, since one the most important aspects of careful investing is ensuring money is spread across a range of assets.
“So it’s a concern that nearly three-quarters of New Zealanders don’t feel they have a diversified portfolio.”
Focusing only on the New Zealand economy meant investors were taking more risk, he said.
“Kiwis already have a lot of exposure to New Zealand markets, be it through their jobs and homes, for example.
“That might be fine in the good times. But what about when the good times stall, or the New Zealand economy goes backward?
“You need other parts of your portfolio, including KiwiSaver, compensating. If you have everything going in one direction the danger is that everything can fall over at the same time.”
Mr Bishop said the onus was on fund managers to better communicate with their investors on ways they could better diversify portfolios, including taking a global approach.
“Given the Australasian market accounts for just 4% of global capital markets, the most effective way for Kiwi investors to diversify is to have some exposure to global opportunities.
“The need for options and expertise to access larger, more liquid global markets is essential to managing risk and maximising returns. That’s the primary role of an active fund manager, to balance risk and reward through proper portfolio diversification, especially in mainstream products such as KiwiSaver.”
The full 2019 State of the Investor
Nation report can be accessed at https://www.kiwiwealth.co.nz/report/state-of-the-investor-nation