Why should you invest? How do you get started and where is the best place to put your hard-earned money?

Investing can seem daunting if you’ve never done it before, so we asked PMG Head of Investor Relationships Matt McHardy to break it down for us.

He gives us some top tips for new investors and, for those already underway, provides some insights to help you maximise your investment.

“The best investment you can make is in yourself. The more you learn, the more you’ll earn.” – Warren Buffet

It feels like a cliché quoting one of the world’s most successful and notable investors, but I subscribe entirely to the notion that knowledge is power when it comes to investing.

The ability for everyday investors to access free and valuable information through the internet has never been easier. Yet all too often, I see mistakes made by novice investors.

Seeking advice on a Facebook community page is not a good strategy. Reading investment articles from leading wealth and fund management experts is. Better still, meet with a qualified financial adviser to find out what best suits your financial goals.

The biggest risk you can take is to ignore your money and do nothing at all.

Adjust Your Thinking

I’m concerned. The world is going through a major structural shift, and the gaping chasm between the haves and the have-nots is widening.

In New Zealand, the age-old path to wealth creation was simply buying a house (or two). However, home ownership numbers are now at their lowest rates since 1951[1]. So, where else can you invest?

Queue the creation of DIY investment platforms providing low entry points and choices. A staggering six in 10 NZ investors surveyed used online platforms such as Sharesies, InvestNow or Hatch to invest in managed funds, ETFs and shares in listed companies over 12 months (Financial Markets Authority Investor Confidence Survey 2021), despite a daunting pandemic.

Other specialised fund managers, like PMG, are lowering the entry points to invest in quality commercial real estate, providing access for more New Zealanders to start investing in commercial property. When bought and held for the long term, it could provide a valuable nest egg for retirement. PMG Generation Fund, for example, has a minimum entry point of around $1090 (as of 30/06/2021).

Another thing to note is superannuation currently assumes people own their own home, and paying rent isn’t an issue. So, with home ownership declining, to ensure we can maintain a comfortable lifestyle in our golden years, having access to other invested funds at retirement is increasingly critical.

Compounding Returns Is Key

Albert Einstein said, “Compounding returns is the eighth wonder of the world. They who understand it, earn it. They who don’t, pay it.”

Simply put, understanding the power of compounding returns is essential to the success of your investment portfolio. Over time, you could be earning returns on your returns. And depending on the rate of return and growth in value over time, your investment value could be doubling every ten years through the simple power of leaving it alone!

PMG has its very own Reinvestment Plan, allowing PMG investors to reap the rewards of compounding returns by reinvesting their distributions into PMG Generation Fund units. Visit the PMG website to use our easy compounding calculator – the insights are surprising.

Diversification Can Limit Risk

Another successful investment strategy is to ensure your portfolio is diversified. Much like our wardrobe of options to suit every occasion, the same diversification should apply to your investment portfolio.

Investing all your money in the rumoured ‘next big thing’, such as cryptocurrency or GameStop shares, is risky… Personally, my invested capital is across several different asset classes to ensure I don’t have all my eggs in one basket, minimising my portfolio risk.

PMG’s Property Team has diversification front of mind when acquiring properties for our funds. Take PMG’s funds, for example – they provide a mix of national and multinational tenants (some of which are essential services) in large format retail, industrial, childcare, and office properties located throughout the country.

When you boil it down, investing in 2021 is arguably easier than ever. But for the uninitiated investor, you have to first build a foundation of knowledge. So, if you are starting your investment journey, please remember: Start early. Contribute often. Compound. Diversify – and do your research!

This article contains the opinion of Matt McHardy and general commentary and views from PMG. Any information provided in this article is provided for information purposes only, is not intended to be relied upon, and should not be constructed as financial advice. 

Prospective investors are recommended to seek professional advice from a Financial Advice Provider who takes into account their personal circumstances. Neither PMG Property Funds Management Limited or the PMG Investor Relationships Team provides financial advice.

[1] https://www.stats.govt.nz/news/homeownership-rate-lowest-in-almost-70-years

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