Rate hike will present new challenges for investors – experts
Investors are prepared to face new challenges as strong inflationary pressures are expected to trigger interest rate hikes.
It has been seven years since the Reserve Bank last raised its official treasury rate, currently at 0.25%, but higher rates are here and on the global horizon.
The big banks had already raised deposit and lending rates in anticipation of an RBNZ move, possibly as early as next month.
Financial Services Council chief executive Richard Klipin said prudent investors should review their investments and check with their financial advisers.
He said this was especially the case for a growing number of young investors who had become enthusiastic users of apps such as Sharesies and Hatch, which offer the ability to buy smaller and larger holdings at great prices. low entry.
“I think it’s still relevant for investors, absolutely. Markets change all the time. Contexts change all the time and interest rates stop falling and probably plateau before they don’t increase then yes… investors are making wise decisions all the time, ”Klipin said.
“We’re in a pretty awkward position here in New Zealand but also in the world in terms of prospects.”
Mark Lister, head of wealth research at Craig’s Investment Partners, said higher interest rates would favor more conservative investors who have taken riskier positions in recent years in search of reasonable returns.
The changes will favor companies that have a proven track record of good management and strong finances, he said.
“We are at a turning point for financial markets, and this is really due to the recovery from last year’s pandemic, and what will accompany this economic recovery is higher inflation, which we are seeing all over the world, y including here in New Zealand, and also a gradual move towards interest rates that look like what we would expect in more normal times, ”he said.
Investors need to plan for the change and figure out which companies will fare well in times of inflation and growth, such as banks, Lister said.
It was important to consider the underlying fundamentals of an investment opportunity, he said.
“You know, if you’re a business and your costs go up because inflation is higher. Can you increase your prices without losing your customers to maintain your margins and profitability.
“This does not mean that we are giving up on our stable and secure performance.”
It was a good time for investors to speak to their financial advisor, or at least take stock, as the investment landscape could be very different over the next two to four years, Lister said.