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Spread Your Risks And Do Nothing Rash, Investors Told

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, July 30 NZPA - As the troubled financial industry takes another hit, investors are being reminded to spread their risks and advised against doing anything rash.

The New Zealand Guardian Trust Co yesterday advised it was suspending new investments and withdrawals from its Guardian Mortgage Fund.

The fund, which invests only in first mortgages and restricts advances to a maximum of 60 percent, holds $249 million among 3700 investors.

The company said the move was being taken to protect investors while the fund was operating below its target liquidity rate of 5 percent, due to current liquidity difficulties in the market,

Institute of Financial Advisers chief executive David Hutton said anyone investing needed to ensure they were spreading their risks.

The way people mostly achieved reasonable returns with lower risk was by using managed funds, which invested in many, maybe hundreds of different investments, he said.

He recommended people seek help from an expert adviser, with the issues dealt with including the margin earned on an investment relative to the risk involved.

Massey University Finance Professor Ben Jacobsen said it was hard to predict how much longer the worldwide financial turmoil might last.

It could be a "very, very long time", although this morning (NZT) shares had closed substantially higher in the US because many investors in the US thought they could see the end.

"Tomorrow is another day and tomorrow there might be new problems ahead, and the market might go down again," he told Radio New Zealand.

If people were getting worried, the best thing for them to do was to talk to a financial adviser and do a proper risk assessment of all their assets.

"Generally speaking, in the extreme long term the market should go up ... So, if you can ride it out, it might be better to stay in," Prof Jacobsen said.

"The only real advice I would give is don't take rash decisions right now,"

He suggested people wait at least until the end of September, if they felt it might be a good time to get into the sharemarket because prices were low.

"Because we know, historically, that these couple of months which is the northern hemisphere summer period tends to be extremely poor for stock markets."

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