Yovich & Co. Weekly Update - 23 September 2013

Sep 23, 2013 | Commentary

This Week's Themes

• The big news last week was the announcement from the government that the indicative listing date for Meridian Energy will be 29 October. If you are interested in purchasing shares please let us know.

• Global markets are still being influenced heavily by the U.S. Fed Reserve stimulus program.

• The New Zealand market reached an all time high on Thursday as markets reacted to the surprise announcement from the U.S. Federal reserve that bond buying stimulus (Quantitative Easing) would not be reduced due to a lack of evidence of a sustained recovery.

• The Aussie market also reached a post Global Financial Crises high.

• The Dow is at all time highs and the NASDAQ is at its highest level since the Tech Boom of 2000.

• The US Dollar fell against both the Kiwi and Aussie as traders continue to use the carry trade to improve returns with the U.S Fed stimulus keeping bond yields subdued.

Investment News

The Ageing Revolution.

Last week I attended a conference on the ageing revolution and the impact that the retirement of the baby boomers is going to have on the economy. There was a broad range of speakers from Doctors to Professors to the CEO of one of the largest Wealth Management firms in the U.S.

Below are some of the key points that I left with and I thought I would share with you for your consideration:

• By 2050, "Old People" (aged over 60) will outnumber children worldwide. How will this transform society?

• What is Retirement?

    o Retiring at 60 in the early 20th century meant that you had passed your best and were effectively no longer capable of working. Retirement was viewed as a well earned rest.

    o The average age has since increased significantly and retirement is seen more as a time to be enjoyed. The biological age vs. a chronological age ie. Feeling younger than you are.

    o In the U.S., spending in retirement actually increases due to enjoying yourself more, taking holidays and spending more time on experiences with family.

• If people are living longer, their investments need to work even harder or people will need to work longer. I have no doubt that the pension age will need to increase so people will be forced to work longer. I also think that it is clear that most people in New Zealand are underexposed to growth assets, and relying on earning low rates of interest on cash in the Bank is not going to give most people a satisfying retirement.

• There are prudent strategies we can use to ensure that you can generate growth in a portfolio while providing a steady flow of income. This strategy is based on having a cash "bucket" which is topped up with dividends and coupons throughout the year while capital sales of shares are only made once the bucket dips below a certain level.

• I believe that investors who implement such a strategy will have their investment capital last longer and generate higher income over an investor's lifetime, thus ensuring that they do not run out of capital before their time has come.

• From an investment perspective, sectors that are going to benefit from the increase in retirees are going to be Retirement Accommodation, Healthcare, Travel and Financial Services.

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About the author

Jarrod Goodall

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