By Cam Harper*
“Passive investing”: is there really such a thing?
Yes, it doesn’t require you to be as hands-on as an ‘active’ approach, but it also doesn’t mean you should simply stand on the sidelines and shake your head if you don’t like what you’re seeing.
The good news is many people know that to get the most from any investment, action is sometimes required.
It starts with the choices you make from the start. If you’re a considered investor wanting returns that best fit your circumstances, you’re not simply putting your hand up at the first option you see on the table and then walking away.
Research into investment options and their providers is essential. This due diligence helps you lay the foundations for how your investment can grow.
For passive investing, this is the biggest job done. But it can’t be a bad idea to stay close. Just like this week’s update to the official cash rate (OCR), how your investment earns is changing all the time.
While the OCR is often highlighted from the point of view of mortgage holders, in New Zealand more of us are investors than mortgage holders. According to the latest Financial Markets Authority (FMA) investor confidence survey 82% of us have at least one investment product, while Census data suggests just 32% of households have a mortgage on their primary residence.
Changing trends in what people are investing in shows that many people are actively considering their options. The FMA’s latest insights show a continued decline of term deposits. Just 20% of New Zealanders held term deposits in 2022 versus 28% in 2021.
Meanwhile, investments across a greater range of products continues to grow. Self-managed shares, peer-to-peer investing, managed funds and even cryptocurrencies are increasing in the mix of investments Kiwi are choosing.
What’s interesting is this change in investment behaviour comes at a time where trust in traditional institutions is declining across the board. Stats NZ’s 2023 General Social Survey showed this trend is consistent across all systems from police to health and media.
In an environment where we are collectively feeling increasingly uncertain about where we can place our trust and confidence, it’s hugely important we don’t just sit back and let things happen to us or our hard-earned money.
Your own research is essential, and for many that translates to equipping yourself with good information and sources to help navigate the range of choices available. Knowing your own risk appetite and goals is key to helping identify what options might be most suitable for you.
Those that invest with us at Southern Cross Partners know that. People often find us when they are looking to break out of cookie-cutter options and find a slightly more hands on investment that could generate good returns in a timeframe that best suits their needs.
We have been providing peer-to-peer investments with property lending for nearly 30 years now, and it often interests people who like real estate but not the means or current appetite to purchase property.
Southern Cross Partners has a robust due diligence process. We literally put our money where our mouth is - lending our money to borrowers first which shows confidence in the quality of lending and opportunities for investors. Financing is often for short or bridging periods, potentially giving it appeal as an option that maintains relative liquidity.
Regardless of where people choose to invest and what their portfolio mix looks like, the important part is that you should be considering and reconsidering your options relatively frequently. And more importantly, that the decisions you make are well-informed – ideally in consultation with a financial advisor - so that you can be confident your investment is a good fit with your current risk appetite.
People’s appetite for risk and individual circumstances are always changing, as are the growing range of investment products on offer. This week’s OCR drop is just one of many signals to reflect on your investment choices and ensure you understand ‘passive’ investing.
For more details visit www.southercrosspartners.co.nz
Southern Cross Partners is licensed to provide peer to peer lender lending services under the Financial Markets Conduct Act 2013. This article is general in nature only and has not taken into account any particular person’s objectives or circumstances. We recommend you speak with a financial adviser before making any investment decisions.
* As Managing Partner of Southern Cross Partners, Cam Harper leads both the lending and investing sides of the business. He is passionate about helping New Zealanders achieve real financial freedom through specialised lending and secured investments.