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Kernel: Make Your Money Work For You

Interest rates might look scary, but it’s actually a great time to invest for growth, says Kernel chief executive Dean Anderson.

18 October 2021

JUNO content partnership Summer 2021

Interest rates in New Zealand have plummeted to new lows, which is great for people taking out a mortgage, but not great for those with their savings traditionally in the bank.

With about NZ$250 billion sitting in on-call bank accounts and term deposits in New Zealand, and the average interest on these accounts being less than 1 per cent, in real terms (after inflation), these savings are going backwards.

So, if you want to make your money work for you but don’t know how, read on.

We spoke with Dean Anderson, chief executive of Kernel investment platform, about the important questions for Kiwis looking to master their money.

When do you need the money?

“If you need access to your funds soon, that is, between one and three years, you’re limited in your options and you’ll still need to consider term deposits,” says Anderson.

But he says when you’re looking at a slightly longer time horizon, you open yourself up to more choices.

Anderson says your investment horizon is probably more flexible than you realise.

“It’s like with retirement – we don’t all actually retire exactly on our 65th birthday,” says Anderson.

“If you have funds that you really don’t need until ‘later’, at least five years away, then it gives you far more options to consider. That’s when you can think about investing in equities or a well-diversified index fund.”

Are you investing for income?

In the past, when Kiwis had access to higher interest rates, term deposits often served the needs of those investing for income. However, this interest rate environment means you need to think again.

“When you’re thinking about an income stream, you need to be a bit smarter about how you invest into equities,” says Anderson.

“I suggest looking at specific sectors, for example, dividend income funds, commercial property, and infrastructure.”

Increasingly, these investments are almost a proxy for a traditional term deposit or fixed income portfolio.

The caution to investors is that you will have to ride the ups and downs of the market, which you don’t have to do with a term deposit, but you will get income and a potential for long-term growth.

Are you investing for growth?

March and April showed us that investments do have ups and downs, but what happened in the months following was a great demonstration of how quickly markets can recover.

One thing we’ve learnt from history is that an investment in equities always recovers – you just need to be patient.

Says Anderson: “The key to successful long-term investing is getting started and then being aware of the mind-money battle.

“Switch off the news headlines and focus on your long-term goals. We get told this time and time again, but it goes against our instincts telling us that more action reaps better results.

“In investing, this is simply not the case.”

However you decide to invest your money, Anderson says the best thing to do is come up with a good financial plan, then set and forget, reviewing it just once a year or when your personal circumstances change – not in response to the latest news headlines.

It may be a financially unsettling time, but there are plenty of great ways to invest and have your money work for you.

Just as long as you’re patient.


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