Investing Failure? Forestlands in the News

When I was young I had issues with credit cards. But I also knew that I should be investing. I was miles away from understanding shares or buying a house but I did stumble across a company offering an investment in pine trees. Forestlands looked like a family run company and you could buy a share in a forest including the land underneath it for $1000. Well I never had $1000. It was not in my capacity at that time to save like that. But Forestlands offered a payment system where you could pay the investment off over 1-2 years. I was instantly sold. Did I do any research into forestry markets? No. Did I read the documentation? Yes but not well. I think I missed a few things. The main thing I missed is that these were B-class shares, meaning no voting rights. That’s never going to be good.

So at the end of March I received a letter informing me that all the Forests have been sold. They couldn’t tell me what my investment was worth and even had a line in the letter advising investors NOT TO CALL and ask because they didn’t know yet. Talk about alarm bells. How can you sell off an asset which has a schedule of investors and their share of the assets and not know how to distribute the funds. Madness.

Forestlands investors left in the dark

So a few investors complained and now the Financial Management Authority is involved and they have got the Serious Fraud Office investigating Forestlands. Apparently there is 18 million in a trust to be distributed to the investors but that doesn’t look like anywhere enough money to even get back what was initially invested. There are rumors that the head of the trust that owns Forestlands actually sold the forests for a lot more and has pocketed almot 19 million dollars in “fees”. We’ll just have to wait and see what the SFO and FMA manage to dig up.

Our Nation Business Review is covering the issue but most articles are behind a paywall so its been hard to keep up with the gossip on the matter but you can see from the pained comments on this article that is affecting quite a few New Zealanders. Forestlands always maintained a folksy family friendly type communications and sent out chocolates with annual updates. It gave them an air of trustworthiness which meant a lot of families felt comfortable buying a few shares for their children as well. Grandparents invested on behalf of granchildren hoping that in the time it took the forest to grow the invest would be worth enough to offset some university fees.

Its hard to keep emotion out of it. My shares in the forest represent about 1% of my total assets. So its a loss I can afford to absorb and move on but you can bet that I feel outraged over the way the Director (Rowan Kearns) has acted.

Are You Shafting Your Partner on Retirement Savings?

I keep coming across families and couples where one partner is not working. That’s cool, life happens, we’re not obliged to be non stop working machines. They are not working due to disability, other responsibilties to family (like taking care of elderly relatives) or they’ve taken years out of their career to raise young children. For whatever reason your partner is out of the workforce you cannot afford to neglect their retirement accounts.

At the very least you need to work out how you can contribute the $20.06 a week to Kiwisaver to at least get the full $521.43 member tax credit for the non-working partner. This is a guaranteed 50% return on investment and it would be foolish to ignore the chance to collect this.

Lets be honest, in New Zealand its most often woman who undertake the full-time care of children. But regardless of who takes on the responsibility those years not contributing to kiwisaver can really cripple your retirement savings. Looking after a family is unpaid work. Long hours, no financial compensation and sometimes the clients like to vomit all over you.

In New Zealand women live longer than men and need more funds to service their retirement yet so many families are neglecting retirement savings for non working women (not to mention when they are working they are often earning less so even more of a reason to make sure those retirement accounts are contributed to!!)Mothers need retirement savings too

Living off one income is hard but there are lots of ways to find an extra $20 in the budget. You owe it to person giving up their income to care for the family, you owe it to yourself and you owe it to your children. Assuming you are still together when you retire there will be more in the pot for the both of you, more money will mean a less stressful retirement.  You also taking care of your children by saving properly for your retirement, you wont be a burden to them, you wont cripple them financially by having to ask them to pay for any of your expenses in your old age.

 

 

New Zealanders Hate the Sharemarket

These are eight quotes from real people about the sharemarket in New Zealand.

1) Shares are so risky – only invest what you are prepared to lose.

2) Balanced funds are a mix of shares (risk factor applies) and the management fees will cut into the profit margin. Govt bonds or fixed term deposits are cheaper options for many.

3) Basically there is NO perfect investment. In times of low interest rates, such as now, high returns are not possible unless you are prepared to risk losing your money. Shares are never a good investment for those nearing or at retirement.

4) 1987 crash cost me $62000 & the signs are there again, inflated housing prices, greedy banks, for sure I will take my Bank guaranteed interest and cant get wiped out as here(Aus) Banks are Govt backed and guaranteed.

5) The shares I bought years ago in local companies are now practically worthless. I’d like to get rid of them except it would probably cost me more in fees than I’d get back.

6) Over the years I have tried Shares, Managed funds and property but I have found that those managing the money look after themselves first and the investor second and trying to manage tenants is a nightmare. It is the investor who take all the risks. I have lost money on both shares and managed funds while those managing my money have lost nothing, so now stick to term investments with the trading Banks. Although I receive a pittance of a return, at the end of the day I can sleep at night.

7) Stockmarket is being propped up by cheap money, this doesn’t even include the money Japan is printing. The FED is pumping 85 billion a month into the financial system, kiwisaver also pushes peoples retirement funds into the stock market propping it up further. Amercan 401K’s, more stockmarket propping… This is unsustainable… I give it two to three years at most. Massive crash coming.

8) I believe foreign exchange markets are corrupt on a scale that you and I (the average kiwi) could not comprehend. NZ is a tiny blip on the radar screen of huge foreign exchanges that deal in trillions of dollars. It wouldn’t be the first time corrupt trader/s have taken the system to the brink. I would never put a single cent of my money in the stock exchange … EVER

with time we can learn to forgive the sharemarket

The 1987 crash left a huge impression on several generations of New Zealanders. Quote number one was even passed down to me by my parents and I’m barely old enough to remember 1987. I thought the sharemarket was equivalent to gambling!

It was a bad time for a lot of people, retirement savings were wiped out, people had to sell their homes. There is still a lot of deep pain and fear towards “the sharemarket” as if it were an evil entity in itself.

Just today a coworker told me that you should only use money you can afford to lose in the sharemarket. I then pointed out that 90% of her retirement savings is invested in shares via Kiwisaver. New Zealand retirement providers have not done a great job of communicating exactly what their products are to the general public. Even worse she believed those retirement savings were guaranteed by the government.  Oh dear. Kiwisaver providers, please try harder.

Sure, it can be risky if you buy stocks based on a tip from a random Uber driver whose brother just happens to work in finance, but there are ways to invest in a diversified less risky way. There’s no need to risk everything on a handful of stocks. I use index funds to gain exposure to a wide range of companies operating in different markets. Its pretty unlikely that hundreds of companies in different parts of the world will all go bankrupt.

I still hold a handful of single company shares because its fun and exciting but I’m investing in index funds for the foreseeable future. After all, owning shares is just owning a business without the hassle of having to run it.

 

October Dividends and a Hostile Takeover

So all the dividends have finally reached my bank account and anything not set up for automatic dividend re-investment has been combined with some cash in my brokerage account and invested back into the MDZ index fund.

Single Stocks
Michael Hill $48.06
Meridian energy $149.20
Auckland airport $15.16
PGG Wrightson $56.95
Mercury Energy $88.88
Metlife care $8.15
Abano healthcare $24.27

Index funds (Smartshares)
MDZ $135.15
MZY $29.55
DIV $55.00

Total $665.37 (After tax has been paid!)

I love dividends, I love them soo much. It really feels like the only true passive income, I don’t have to do anything as long as the company does well I do well. Passive income is a magical thing and is an essential part of any financial independence or early retirement plan. I finally have money that is making me more money. You can read about how to buy shares and get started investing in the New Zealand share market in my previous post “So you want to buy some shares……”

Total Dividends for 2016 $1037.17

I’m pretty pleased with the dividends this year and its after tax too! Making a grand for doing nothing is a sweet deal. It doesn’t even seem real. It certainly makes up for the mild melancholy that takes over when the market is going into bear mode. I’ve stopped checking my portfolio on my breaks at work, I was obsessing and its better that I just chill and keep to the plan. $500 a month, every month invested into index funds. I’m keeping it simple from now on, no more single stock purchases!

The New Zealand Share market has been on a downward trend for the last few months, but I had one little bright spark. Abano healthcare become the subject of a hostile takeover on Friday afternoon and the share price jumped from $7.60 to $9.00 in less than an hour. It was pretty exciting to watch and word is they are paying $10 a share to try acquire 50.1% of the company. I’m not really sure what that means for a little minor shareholder like me, lets just say no one’s calling me on the phone to try buy my shares just yet, but it was quite a fun afternoon for an amateur investor.

 

What’s it like switching Kiwisaver providers?

Have you ever moved your retirement savings? I recently switched to new kiwisaver provider Simplicity and here’s how it went.

Contemplation

I first started thinking about switching kiwisaver providers when I wrote this post about kiwisaver fees. New Zealanders don’t have many options for super low fee retirement funds. My current provider Kiwiwealth while very open and transparent still charged 1.17% in fees. This is (shockingly) below average. Many providers are charging a lot more than this!

Last month a new kiwisaver provider started showing up in the local newspapers. Simplicity claimed very low fees of 0.31%, they are owned by a charitable trust and a 1/3 of their management fees are donated to charity. Its an easy sell, sounds great on paper. Oh and they mostly use index funds, so nice and diverse.

Simplicity Kiwisaver provider

The Switch

I was intrigued, a low fee fund finally on offer in New Zealand! After reading a bit more information on their website (including the product disclosure statement) I boldly decided to make the switch. Simplicity makes it easy to switch, you have to provide your IRD number and upload some identification (scanned my passport). Painless and after that it’s all in their capable hands. Like all good decisions it was made on a Sunday afternoon. I’d been with Kiwiwealth since I first joined kiwisaver, leaving was hard, for the most part they were pretty good but in the last year my balance had flat-lined. I also learned that they don’t invest in New Zealand shares at all. Which didn’t sit well with me and maybe that’s not very rational, but I like to think we have a few companies here in New Zealand doing exciting things. Show a little faith in your home economy!



 

Patience and Denial

The days dragged on, I paced, I checked my emails constantly. I logged into my old provider most days to see if the balance had been transferred. I got a reassuring email from Simplicity letting me know that yes things are happening but it might take some time, apparently your old provider has 35 days to transfer the funds! That’s working days, so its 7 weeks to get their arses into gear.  Finally on day 13 something actually happened, I was LOCKED OUT of my Kiwiwealth account. Now I know my money is (likely) no longer with them and I’m no longer a client but it seems just a little passive aggressive to delete my login credentials. There wasn’t a “Sorry to see you go email” or even a plea for me to stay. No communication, apparently I’m dead to them now.

What the hell

At lunchtime on working day 15 I got notification from the IRD that they will be forwarding money from my paycheque to Simplicity, yay things are moving along. Meantime no idea where my money is. For 2 days my money has been in the ether, drifting. How do they transfer it anyway? Send a check, money order, bank transfer? Its a mystery.

Resolution

Anyway I got home after work and there was a letter from Kiwiwealth, finally communication! It was a statement of my accounts letting me know how much money would be moving over to Simplicity and that they were sorry to see me go. Thanks guys, I was really hurt when you locked me out. I missed the chance to down load my historical info and how can I geek out on my savings numbers now? Thankfully I had loaded some annual info into a spreadsheet so I can make graphs to my hearts content.

Later in the evening I got an email from Simplicity announcing that my account was active! I logged in and all my cash was there. They did let me know that the deductions from my paycheck were not occurring just yet, but I had the notification from IRD so I know its in the process of being sorted out.

So overall not too painful, 3 weeks of limbo and then bam, all done. Although they legally could take up to 35 days it only took 15, so not super speedy but not terrible either.

 

OMG the Sky is Falling – Useless Media Panic

Our national newspaper is kinda sucky. Since the digital age they are all about click-baity headlines and celebrity gossip with a few bastions of journalistic integrety trying their hardest to break through garbage. It seems like most editors have been fired and fact checking is now a relic lost to the golden era of newspapers.

This recent dip in the market was covered by the business sections with new articles during the day, oh crap sky is falling, oh wait don’t worry we’re bouncing back, NO ACTUALLY PANIC because this afternoon investors sold everything!

Sharemarkets! everybody Panic screenshot-2016-09-13-21-46-24

“Fear returns” and “relief rally” are highly emotive and even in someone like me, who has been investing in shares since before the GFC, it still elicits a stirring in the gut.

My strategy is to just keep on keeping on. I’m investing in the sharemarket for the long term i.e more than ten years. I mostly hold index stocks and the companies I have bought individual stocks of seem solid enough (well nothings set in stone I guess) and I’m not worried about any of them going bankrupt overnight because of jittery markets. I still make my monthly contributions and if its gets too depressing looking at the share prices, I just stop looking so often.

Being well diversified keeps the panic at bay and helps me sleep at night. My investments are in multiple type of index funds and in multiple countries. I also have other types of assets like property, P2P loans and forestry.




It helps to be mentally prepared for dips in the market, imagine your net worth falling, imagine losing 10%, 15% 30% 50% of your net worth! And then think about what you would do in those scenarios. By thinking through worst case scenarios you’ll be emotionally prepared when they happen and less likely to make a gut reaction. You’re more likely to behave logically because you’ve “practised” how to react.

Another way to protect yourself from these sky is falling articles is to gain some insight into the way these sites work, they want clicks so the headlines are deliberately shocking. Brent Sheather wrote an insightful piece on the half truths and outright lies that appear in media finance commentary and that might help immunise yourself against being swayed by “expert opinions” in news media.

Of course maybe the best solution is just to just stop reading the business section?

 

 

 

Small Time Dividends – Don’t let them Escape!

Today I got my Abano Healthcare dividend. It was approximately $29 or enough to buy a 6 pack of craft beer and 500ml bottle of something special on the side. Yum! But drinking my profits was never the plan (well one day maybe).

Abano Health share price graph
Its been a fun 6 months or so, I bought in around $6.70, thanks Abano

So no beer for me because I have the dividend re-investment plan activated. My money has automagically turned into 3 more shares. Every 6 months the dividends are used to purchase more shares on my behalf and any remaining money is rolled over till the next 6 months.

Dividend re-investment plans work really well in New Zealand for a couple of reasons.

  1. We currently  have no capital gains tax. This means that these small amounts of money aren’t going to become a pain in your ass years down the track when you need to calculate your capital gains on all the small share buys.
  2. Brokerage fees here are really HIGH! It costs a lot to make a trade so anytime you can buy shares for free is a win in my book.

So if you’ve been wondering what to do with all your little dividends get online and check if the company has a DRP or Dividend re-investment program. Its way better than receiving a cheque (argh so inconvenient!) or having the measly $29 sit in your account doing nothing and not earning its keep. Dividend re-investment is already happening for most of you in your kiwisaver accounts and probably in your index funds as well (unless you checked the dividend pay out box!).

Out of sight out of mind, it happens with out any extra input and that tiny dividend is no longer tempting you to buy some craft beer that your waistline doesn’t need! Make sure your money makes you more money by keeping it invested. It’s the aim of the FIRE game and it will get you the the finish line faster.