Invest in Cash

Read More

Interest rates have been low for some time now – great for borrowers but bad news for investors. Looking ahead, there are signs that interest rates will rise, albeit slowly. We have had low inflation, so leaving your money invested in the bank at a low rate hasn’t led to a loss of purchasing power. Holding cash isn’t going to make you a fortune, but cash is still an important component of any investment portfolio. Your alternative choices are to invest in fixed interest, property or shares.

We are at a point in market cycles where holding more than usual in cash makes sense. In a rising interest rate environment, the market value of bonds falls, especially for bonds with a long maturity. Whereas conventional wisdom says bonds are conservative investments, at present they carry a high risk of loss of value. Alongside this, the share market is near its peak and at some point there will be a correction – that is, a drop in value. Holding more than usual in cash will offer two advantages in the medium term. Cash will offer protection against loss of value but also the opportunity to take advantage of any over-correction in the bond or share markets.

The best time to buy any investment asset is when the price is low. Market falls are driven primarily by fear and panic and at certain points prices can drop below what represents good value in objective terms. This means bargains are to be had.

It is also important to have cash on hand to cover your spending requirements when markets are volatile. This means you won’t be forced to sell investments at a time when prices have fallen. Having cash on hand gives you the luxury of time to wait until prices have risen again.

Related Articles

Liz Koh

Budget Winners and Losers

The latest Government budget had something for everyone but while most households will be a few dollars a week better off, there are some clear winners and losers. In the winners’ corner are businesses, those on high incomes, and savers. The biggest losers are property investors who have built large portfolios financed partly by tax rebates.

Read More »

Top Up or Miss Out

The end of June is an important date for KiwiSaver members. The financial year for KiwiSaver runs from 1 July 2009 to 30 June 2010 and if you have contributed at least $1,040 to KiwiSaver during that time, you will be eligible for the full amount of Government tax credit to be paid into your KiwiSaver account in July.

Read More »

Responsible Investing

There is a worldwide trend for investors to want to make a positive contribution to the world by investing in companies that are socially and environmentally responsible. If you are passionate about the effects of climate change, the scarcity of food and water, and social or environmental policies in general, then you will no doubt wish to ensure that the companies in which you invest are going about their business in a manner that is consistent with your views.

Read More »

Helping You Live your retirement To the Max

Keep in touch

Fill in your details and we’ll get back to you in no time.