October update 2019

October market update - A reminder on why independent advice is better - Why we use "Dimensional FA" as a fund manager

October was and interesting month in markets with most portfolios being fairly flat for the month. It was a time where international equities were up around 3% for the month to be the star performers, this was due to more optimism around trade deals between US/China and Brexit that supported markets. Also there was less fear that the world economy may be heading into a recession. So why were portfolios flat in performance? These factors were a detractor:

  • Rising interest rates meaning fixed interest rate returns were negative for the month
  • Stronger New Zealand $$ meant the returns were muted in NZ$$ terms
  • New Zealand share market being one of the poorest performers for the month falling back 1.50%
  • Similar falls in Aussie

Overall optimism has returned which is a good thing and that has seen a great start to November.

As you my know or I have talked about before, how I believe in the value of independent advice and what I and others believe is broken with the Broker and Bank dominated investment space. Here are just a few points into why I know New Zealanders and most people world wide are better off with an independent:

  • Firstly there is no conflict of interest and an independent is getting paid by you and not representing a product or both sides of the buy/sell. They are a fee for service so work for you not representing the other side
  • An independent is usually more holistic and starts with what you are trying to achieve and the investment is the bi-product of your goals/values and aspirations
  • Brokers and Banks think that they have some knowledge and or skill to beat the market by picking the right investments. All evidence shows this not to be the case but they will charge you on the assumption that is what you’re paying for. Your dart board has statistically the same chance of being right and actually, as it is lower cost, it is proven to be an above average strategy.

Here are couple of articles that may be of interest on the subject to support these views:

Now for those who have a portfolio with us at Optima Wealth, you will know you hold a lot of Dimensional FA funds. Given this I wanted to dig deeper to let you know more about Dimensional FA, a firm that started in Austin Texas in 1981 and here are some highlights of who they are:

  • Manage over $900billion NZ worldwide
  • Have 3 Noble Laureates in their team
  • 36 Ph’d’s
  • 1300 staff worldwide
  • Clients include, Governments, Sovereign Wealth funds, Institutions and Retail clients
  • Retail clients can only get access to them through an Holistic Financial Planner
  • Strong long term track record
  • Use academic evidence and systematic approach to investing
  • Are lower cost than active management but deliver above average returns

For a comprehensive PDF document on all the full analysis, please read this link. Why dimensional funds

Thank you

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