Dunotter Strategic Wealth

  11th December 2020 Over the past century academics and practitioners have increasingly espoused theories that have become part of almost every investment doctrine one could name. Theories that have tested and refined over time but now essentially taken as simple fact. One of these relates to the construction of an investment portfolio, where the asset allocation is dependent on an investor's attitude to risk. As Investopedia explains: Over the decades, this has been borne out repeatedly. Equities are the most volatile asset class but produce the highest overall returns. Money is the most stable but the returns are the lowest. Bonds fall in between these two. Increasingly, however, people are querying whether this is still accurate.  Equities certainly still produce the highest returns, money still the lowest, and bonds in between the two. But what about the associated risk? Since the dawn of Quantitative Easing (aka QE. Massive bond-buying by central banks) in 2008, the bond mark

  “Neither a borrower nor a lender be; For loan oft loses both itself and friend.”  That famous line by Polonius in Shakespeare's Hamlet would seem prudent advice in most ages. However in today's world, we find our economy awash with debt as never before. The reasons for this are numerous.  One could argue that it starts with perhaps perverse tax incentives, whereby companies are essentially encouraged to borrow by being able to offset interest costs against their profits. The original rationale for this was the belief that borrowing would only occur in order for the company to grow. This therefore makes sense: a tax regime that encourages growth is of course a good thing.  But when investor demand for debt is such that a major cash-rich firm borrows to fund a dividend payment, as Apple has repeatedly done ( Apple ), then many would argue that something has gone very wrong with the system. Then of course there is the ongoing fall out from the GFC. For twelve years now, central

  5th December 2020 The Financial Services Council of New Zealand recently published this paper ( research paper ). It stated a number of areas in which those who used financial advisers were in a better position than those who did not. One of the findings that advisers in New Zealand and the media have latched onto is:                      "New Zealanders who receive financial advice end up with around 50% more money in their KiwiSaver (personal                     pension)". As my wife noted on hearing this: "It's probably because those who use advisers are typically wealthier than those who do not". This is indeed what the paper went on to state. So the massive difference is clearly not down to the skills of the advisory community. So the headline-grabbing figure is therefore pretty misleading. This may cause many to dismiss the whole report as propaganda. But hang on a minute. The impact of using advisers turned out to be far more modest. The average returns

1st December 2020  Welcome to the inaugural post for this blog. While I am completely new to blogging, I have almost twenty five years of experience in the financial world and so sincerely hope that you find my summaries and observations of some interest. When people mentioned investing in gold, I'd always thought of line that Warren Buffet apparently gave during a speech to Harvard business students in 1998 :  “ It gets dug out of the ground in Africa, or some place. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head .” Similarly I'd always ignored analyst speculation as to what the price "should be". They never seemed to be even close to what it turned out to be. The other central reason given for investing in gold never seemed to be borne out in reality either.   It's an "inflation hedge". So you while it doesn't pay you inter