Investing in shares can be a great way to grow your savings. But investing is tricky and knowing how to create a healthy portfolio is even trickier.
With more and more Kiwis now taking to the share market, it’s important your investments are set up for success and you’re not taking on too much risk. Milford Portfolio Manager Mark Riggall shared a few tips with Newshub on how you can build a healthy portfolio.
Riggall, who currently manages Milford's KiwiSaver Plan Balanced Fund, has spent the last 20 years investing professionally in London, Hong Kong and Auckland. He says "Before you do anything, you have to work out your goals. What are you trying to achieve?".
There are a range of goals you can have as an investor – a few common ones are saving for a first home, saving for retirement, your child’s education or for those who are retired, your goal could be to generate an income to help fund your lifestyle.
With markets in a constant state of change, moving up and down, Riggall says there’s a risk in not setting goals. "If you don't have a clear plan, it’s easy to panic and sell after markets have gone down. The risk there, is that you’re effectively locking-in your losses and removing your ability to benefit if markets rebound."
Once you’ve established your goals, Riggall says you want to ensure your investment is diversified by not having all your eggs in one basket. If your portfolio is concentrated in only a handful of companies, you’re taking on more risk because if one investment performs poorly it will have a bigger impact on your portfolio’s overall return. But when you diversify across a number of companies, it can help smooth out your returns and shelter you if one of your investments is a poor performer. Riggall said it can be hard for investors in New Zealand to get fully diversified. "As a New Zealand investor, your options are somewhat limited. The New Zealand share market is small and certain industries are not fully represented."
Riggall said investing in different types of companies both locally and globally, can help. Milford uses their global investment expertise to diversify their funds into many companies in different industries and geographic regions. "Diversifying globally gives you access to more opportunities, and it can help reduce risk."
The last tip is to stay active. Once you’ve set your goal and diversified your portfolio, you want to stay vigilant. Properly managing a portfolio takes a lot of time, effort and expertise to ensure your investments are still fit for purpose. But the good news is you don't have to do all this detailed work yourself. There are a range of specialist fund managers that can help. Investing is their full-time job and they can make investing simple and easy because you get a professional actively managing a portfolio for you. If on the other hand, you are keen to do the work and manage your own portfolio, it's important to actively monitor your investments and have conviction in what you’re investing in. As Riggall points out "Having conviction is important. It's tempting to just borrow someone else’s idea, but are they going to tell you when they've changed their mind?"
There’s no doubt that investing has changed in New Zealand over the past few years. There are now a wider range of options available to investors. Whether you prefer to harness the skills of a specialist fund manager to do the work for you, or you plan to manage it yourself, it's easy to get started. Unlike property investing, you generally don’t need a big deposit to get going. You can start small and contribute a little bit each week.
If you’re not sure where to start, the best advice is to get some advice. Working with a financial adviser can take a lot of the guesswork out of it for you. There are also good online risk profile questionnaires that only take a couple minutes to complete. Most KiwiSaver providers will have one of these tools on their website and they can provide you with a helpful level of guidance.
This article is intended to provide general information only and should not be viewed as investment or financial advice. Past performance is not a reliable indicator of future performance. Before making financial decisions, you may wish to seek financial advice. Before investing, please read the relevant Milford Product Disclosure Statement as issued by Milford Funds Ltd at milfordasset.com. For more information about getting advice at Milford see our Financial Advice Disclosure Statement on our website.
This article was created for Milford.