Buy smart with our high dollar
Regardless of where the dollar goes in the future, New Zealanders should understand their currency is an opportunity to be taken advantage of. The dollar’s strength is a double-edged sword. It provides cheap imported goods and makes our cost of living cheaper. It also puts pressure on interest rates to remain low.
For investors, the high dollar creates conflict. If, like me, you have kept a proportion of your super fund in international investments for the past decade you will implicitly understand the handbrake this has applied to your fund’s performance – above and beyond the torrid times in equity markets. Yet, despite all this, and the understanding that New Zealand’s economy is “relatively” stronger than many around the world, it is important to benchmark us against ourselves.
Although, for the time being, the dollar remains relatively buoyant. The change in sentiment towards the New Zealand dollar will come quickly, when it comes. And it’s for that reason I continue to think that prudent international investments (as distinct from holding foreign currency, in preparation for your next trip) is a smart play that will lead to improved wealth in the coming decade. The big question is how to make the investment? The broad stock market, most likely, holds little prospect.
And though many online brokers now provide access to international shares, you need to have strong information lines to be taking on US or European shares directly. The same could be said about international bonds – with the real problem that these prosper most when interest rates are falling and so their race may already be run.
Managed funds, including your DHB super (assuming you are in a growth or even balanced fund) offer a sizeable exposure to international shares including Commodities, infrastructure and emerging markets. Alternatively you can use the International share and International listed property securities sector funds assuming you have the risk appetite.