There’s no shortage of financial advice ‘out there’, from stock tips to market warnings. But for the everyday investor, mastering the basics is not simple. It’s sort of like an investment sundae, starting with a solid foundation before adding fancy toppings. With Forsyth Barr’s guidance there’s no need for endless books or complex charts. 

1. Play the long game

Albert Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it, he who doesn’t, pays it.” By reinvesting returns, your initial investment grows exponentially over time. Starting early amplifies this effect, but if you haven’t already started, don’t despair – the second best time to start is now. Even small, consistent contributions matter. 

2. Diversification protects growth and wealth

Markets are unpredictable, as recent years have shown. Diversification – spreading your investments across a mix of assets – reduces risk by cushioning against downturns in any one area.

In New Zealand, many people focus heavily on property or local businesses. While these are important, they can sometimes leave you exposed to country and/or sector-specific risks.

The lesson is simple: don’t put all your eggs in one basket. While past performance doesn’t guarantee future returns, a well-diversified portfolio tends to offer resilience and steady growth potential. 

3. Inflation is the silent wealth killer

Inflation, which measures the rising cost of goods and services, erodes the purchasing power of money over time. For example, NZ$100 today might only buy NZ$67 worth of goods in 20 years time at a steady 2% inflation rate. To preserve and grow your wealth, your investments need to outpace inflation.

Historically, investing in diversified assets such as shares has been one of the best ways to grow purchasing power. For instance, if you’d invested NZ$1 in a global stock index in 1980, it would be worth more than NZ$22 today, after taking inflation into account.

Compare that to a dollar under the mattress, which would now buy just 15 cents worth of goods. Term deposits are another case in point. Current term deposit rates are falling and so the value of the return diminishes the closer the rate gets to the annual inflation rate.

Whether you’re saving for a house, retirement or your grandchildren’s education, investing is a tool to grow your future purchasing power and financial independence.

Don’t get distracted by flashy headlines or short-term market predictions. Focus on the essentials: start early, stay invested, diversify and account for inflation. Once your base is solid, you can enjoy pastimes such as the beach – or whatever else life brings – while your investments work for you.

Happy investing!

Step 5: Check your contact details

A final tip: make sure your broker can contact you. If you move business premises or change your phone number and email, ensure that you notify your broker. Failing to update your details may mean you don’t receive your insurance renewal documents, leading you to be uninsured. You may not even realise you’re uninsured until it’s too late. This is especially important to keep in mind if you’re about to go on a long holiday or not going to be contactable for a while. 

To learn more

Discover how Forsyth Barr can support CA ANZ members here.