Quantum Wealth Summary

 

  • With housing values uncertain, is now a good time to diversify into shares?
  • What are the available brokerage options for global shares?
  • How can you protect your money and review the custody arrangements for each broker?
  • What brokers are professional fund managers using?
  • How do the world’s wealthiest people hold and diversify their wealth?

 

 

The governor of our central bank here in New Zealand previously headed a large fund.

The largest in this country — the national superannuation fund.

So when he makes statements about investing, I listen.

 

Adrian Orr. Source: Forex Live

Adrian Orr made a speech to the Property Council last week. He reminded us that diversification is one of the few ‘free lunches’ in finance. But many Kiwi investors weren’t digesting that.

Here’s what I got from his speech:

  • 57% of gross New Zealand household wealth is in housing. It’s too much.
  • Investors need to identify and manage the risks around housing cash flow and value.
  • Houses as an investment have risks, particularly if you need to sell at the wrong time.
  • The ‘wrong time’ could be coming as incentives disappear, population growth wanes, and housing supply grows.
  • Doubling down on the same set of risks by buying another house is not diversification.

He shared some graphs.

The most useful one is this. Showing the run-up of global asset prices, especially following the pandemic and money printing:

 

 

 

Since we run wholesale portfolios for investors, we’ve been receiving enquiries on buying equities — stocks and shares. It seems some housing landlords are quitting. And the investment tide is changing here in New Zealand.

People want access to global markets. Of course, that has risks. Which is why, today, I want to look at brokerage options for accessing financial markets in the most risk-managed way.

First up: Orr is right. Kiwis are way too invested and leveraged in local housing. Let alone climate and natural disaster risks in this country, which straddles a geological ring of fire.

Then there’s my study on the world’s wealthiest people. They don’t hold the bulk of their wealth in housing. They diversify.

The US has the highest number of high net-worth people globally.

Across all US households:

  • The top 1% has an average net worth of US $11.1 million.
  • The top 10% has $1.2 million.

Take a look at this from the Federal Reserve:

 

 

The top 1%, by far, hold most of their wealth in diversified equities. Around 50% of their wealth. Real estate — likely their home — only makes up about 11%.

The top 10% also have a significant portion in shares. Around 26% of their wealth versus 20% in real estate.

You need to enter the bottom 50% to see a New Zealand-style real-estate preference. At that level, around 52% have their wealth in real estate. Less than 1% in shares.

But we love houses in Australasia. We love owning them. Doing them up. Renting them out. And watching TV shows about them.

A top-rated show here now features the prime minister’s fiancé profiling the challenging business of moving homes on trucks to new sites.

 

Source: The Spinoff

 

Fascinating. Inspiring. But an investment involving blood, sweat, and tears.

I often joke: in England, a man’s home is his castle. In Italy, his bunker. In New Zealand, it’s his life’s work.

Well, there could be easier work out there now when it comes to investing…