TONY ORMAN
Investing off-farm has merit in diversification of income and taking advantage of some excellent opportunities to get returns on capital invested said financial author Martin Hawes in an address to the monthly meeting of Marlborough Federated Farmers.
“You should always be alert to opportunities and possibilities in reallocating income,” he said. When cash returns becomes available, three possibilities are to repay debt, finance farm development or invest off-farm. A strong emphasis should be on retiring debt but be aware of opportunities to invest at least small amounts off-farm.
“Contrary to oft-held opinion, this at a time of down-turn, is the time to invest,” he added. Martin Hawes said he viewed off-farm investment as looking to the future. Succession is one reason with some of the future money able to be directed to a family member who does not go farming.
Another reason is the asset in the farm and a third reason is “risk litigation” to lessen the impact of a body blow to pastoral farming such as foot and mouth disease getting into New Zealand.
“If foot and mouth disease was suddenly detected here, you’d be delighted you had some of your money off-farm or even off-shore.”
Digressing for a moment he said the disconnect between town and country had increased from when he grew up in South Canterbury whereeveryone had a connection with the local farming community.
“A lot of New Zealanders who are now urban dwellers and have grown up in town, just don’t understand the impact something like foot and mouth would have on New Zealand. Everything would be impacted including currency.”
He advised options for farmers’ investment could be shares, i.e. ownership of businesses, listed property and fixed interest. The way that they were mixed is critical. Business performance drives the share price.
Statistics showed at about age 68, most farmers were looking to quit farming so from age 40 or 50, a farming couple should be starting to look at investing off-farm.
“As to timing, now is the opportunity with markets in downturn.
”Judicious investing can be overtaken by human emotions he cautioned. The economy could wildly fluctuate and Martin Hawes cited the 2008 recession with “bounces” upwards between 9 percent and 19 percent.“You can’t avoid that volatility.”Most people invested on the thrill and excitement of “boom times” and then as the economy heads down, they cashed in investment.
“That’s wrong. During the downturn is the time to invest.”Referring to investment property he identified listed property as an avenue to consider. Usually listed property can be in New Zealand but there are about 40 listed property funds in Australia and many more around the world.
“In fact with their diversification, good yields and liquidity, I’m not sure why a retired investor would own any other sort than investment property,” he added. “Remember it can be difficult to look after savings and turn them into an income. So it’s very important you do it properly. Thus get a financial advisor.”
In spite of his long background experience in finance, Martin Hawes said he had a financial advisor who invested money for him. “In retirement, you take on the role of a money manager. The capital you have will probably be significant and a critical part of your income and your retirement well-being. A good trusted advisor ought to be a critical part of your money management,” he said.
