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How To Choose An Investment Fund You Can Sleep With At Night · That Home Loan Hub

• 0:20
  SPEAKER_02: Have you ever done a risk profile on yourself to understand what sort of risk taker you are?
• 0:27
  SPEAKER_02: If you haven't, listen up to understand what it takes for you to do the test and understand what it all right.
• 0:38
  SPEAKER_03: That's a blooper.
• 0:39
  SPEAKER_03: Absolute blooper.
• 0:40
  SPEAKER_03: All right, I tried to sound really serious.
• 0:41
  SPEAKER_03: Elizabeth, hello.
• 0:44
  SPEAKER_00: Hey, do you know what I was thinking when you were starting to introduce that?
• 0:48
  SPEAKER_00: Is of the like quizzes and magazines that I used to do when I was a teenager, like Cosmo quizzes and stuff.
• 0:53
  SPEAKER_00: Like, what sort of risk taker are you?
• 0:55
  SPEAKER_00: Um and I feel like we should make financial profiles a bit more fun and make it more like a magazine.
• 1:02
  SPEAKER_00: So I'm gonna work on that.
• 1:04
  SPEAKER_00: Okay.
• 1:04
  SPEAKER_00: But I did have to create my own risk profile for when I set up my business at the start of this year.
• 1:10
  SPEAKER_00: So I had to kind of do a lot of thought and look at what else was out there and see what I liked.
• 1:17
  SPEAKER_00: So I think that people just instinctively answer what they think they are.
• 1:23
  SPEAKER_00: Like I get so many people who I'll say, okay, like part of this meeting today, we're gonna do a risk profile on you and see what fund you should be in.
• 1:31
  SPEAKER_00: And then they'll be like, oh, I'm a conservative investor, you know?
• 1:35
  SPEAKER_00: And like they've already put themselves into a box.
• 1:37
  SPEAKER_00: Yeah.
• 1:38
  SPEAKER_00: But they don't then when we do the quiz, they often come out quite differently.
• 1:42
  SPEAKER_00: So is that helpful to talk about the questions I ask in the risk profile?
• 1:46
  SPEAKER_00: Absolutely, let's do that.
• 1:47
  SPEAKER_00: Okay.
• 1:47
  SPEAKER_00: So this is a test of my memory because I don't have a copy in front of me.
• 1:51
  SPEAKER_00: But the three things that it kind of comes down to for me is what's the time frame?
• 1:56
  SPEAKER_00: And that's what people like literally get stuck on sometimes.
• 1:59
  SPEAKER_00: They're like, oh, I want to invest to grow my money.
• 2:01
  SPEAKER_00: Oh, I don't know when I'm gonna need the money.
• 2:03
  SPEAKER_00: Do you know?
• 2:04
  SPEAKER_00: Like, but the time frame is very key because if you need that money in like one to two years and you go in a high-risk fund, the chances of losing the money and you then need it and the balance is dropped, is higher.
• 2:19
  SPEAKER_00: Whereas if you don't need it for 20 years, you can write out multiple recessions in that time.
• 2:25
  SPEAKER_00: So, so that time frame thing is like the first thing I talk to people about.
• 2:29
  SPEAKER_00: That's the first part of your risk profile.
• 2:32
  SPEAKER_00: And then there's also how do you describe yourself?
• 2:35
  SPEAKER_00: So I do want to know what they think they are.
• 2:40
  SPEAKER_00: And some of the questions that I ask, which I haven't necessarily seen in other risk profiles, but I find it helpful to talk through with people is have you been through a market drop before?
• 2:53
  SPEAKER_02: Uh-huh.
• 2:54
  SPEAKER_00: So you get people who come in who maybe especially young people, and they'll answer yes to all of the questions that would put them in the high risk fund, but they've never experienced what it's like to see that money drop, just open up their KiwiSaver or whatever, or even like look at the value of their house and suddenly see that it's dropped dramatically.
• 3:14
  SPEAKER_00: And that like sinking in your stomach that you sometimes get.
• 3:17
  SPEAKER_00: Yeah.
• 3:18
  SPEAKER_00: You know?
• 3:19
  SPEAKER_00: And and obviously we are talking to people about again, comes back to your time frame.
• 3:24
  SPEAKER_00: Does it matter that it's dropped?
• 3:26
  SPEAKER_00: Mm-hmm.
• 3:28
  SPEAKER_00: But you still don't want people having that sinking feeling too much.
• 3:33
  SPEAKER_00: So understanding if they've been through that and how did you react?
• 3:36
  SPEAKER_00: Were you dying through COVID?
• 3:38
  SPEAKER_00: Were you so stressed out?
• 3:40
  SPEAKER_00: Or were you just like oblivious?
• 3:43
  SPEAKER_00: Like not even checking.
• 3:45
  SPEAKER_00: I think I have Kiwi Saver.
• 3:46
  SPEAKER_00: I don't know where it is.
• 3:47
  SPEAKER_00: I haven't checked it.
• 3:48
  SPEAKER_00: It's fine.
• 3:49
  SPEAKER_02: I didn't.
• 3:50
  SPEAKER_02: I did not care for one bit because I knew that I can't access my Kiwi Saver until I'm 65.
• 3:55
  SPEAKER_02: Yeah.
• 3:55
  SPEAKER_02: So that little blip didn't didn't matter.
• 3:58
  SPEAKER_00: And then that's like that's the last kind of like answer is like, yeah, I saw it, but it didn't phase me.
• 4:04
  SPEAKER_00: You know?
• 4:04
  SPEAKER_00: And I think asking those questions, like delving a bit deeper than just how much risk are you comfortable with.
• 4:11
  SPEAKER_00: Actually, have you lived through it before?
• 4:12
  SPEAKER_00: Actually, what's your time frame?
• 4:16
  SPEAKER_00: What else do I talk to people about on my risk profile?
• 4:19
  SPEAKER_00: I try to give people a tangible example.
• 4:21
  SPEAKER_00: People find it really hard to like deal in vague things.
• 4:25
  SPEAKER_00: So it's like, okay, well, if there was$100,000 in your KiwiSaver and then that dropped by 20%, are you gonna be calling me at one in the morning panicking because I put you on a high growth fund?
• 4:36
  SPEAKER_00: And then we had another global event and the balance dropped.
• 4:39
  SPEAKER_00: And are you gonna be doing that even if you're not touching it for 20 years because you've just looked and seen it and that's too much for you?
• 4:46
  SPEAKER_00: Would you be better to have been in a fund where it was only going to drop by 10%, not 20%?
• 4:51
  SPEAKER_00: That's what we kind of want to work out is like what's the maximum risk someone could take and they can still sleep at night if something goes wrong?
• 4:58
  SPEAKER_02: You've just reminded me, and I guess because you've got a medical background, you'll relate to this as when people go to have a surgery and they have to sign this form that you know, you if you do the surgery, you might come out and you might have a brain aneurysm, or you know, you may not wake up at all, or you may never talk or walk or whatever, you know.
• 5:15
  SPEAKER_02: And and it could be a simple surgery or something, but because the risks are there, you have to outline all those risks.
• 5:24
  SPEAKER_02: And they may not ever happen.
• 5:25
  SPEAKER_02: I hope not.
• 5:26
  SPEAKER_02: You hope not.
• 5:27
  SPEAKER_02: You may, you know, have a surgery come out and be better off having this surgery, but the medical society has to tell you about the risks.
• 5:36
  SPEAKER_02: And I guess it's the same in your industry and my industry, is that we have to present all this risks and test people, stress test them.
• 5:46
  SPEAKER_02: Yeah, how willing are they to take certain risks?
• 5:50
  SPEAKER_02: And are they better off not going through a full procedure, but maybe get half a procedure, you know, not go full.
• 5:56
  SPEAKER_02: I don't think you should become a doctor.
• 5:58
  SPEAKER_00: Thank God.
• 6:00
  SPEAKER_00: We just didn't do half the surgery for you.
• 6:05
  SPEAKER_03: Right, it's a good example.
• 6:06
  SPEAKER_03: We're just trying to lighten the mood here.
• 6:08
  SPEAKER_02: But what I'm trying to explain is that, you know, as you say, if you are gonna be stressing out about it every week, maybe then stay on conservative fund and not make 30% return, but maybe make 10% return.
• 6:20
  SPEAKER_00: Yeah, I think that's the thing is finding out what suits each client.
• 6:24
  SPEAKER_00: And also, I think when we talk through the questionnaire, people kind of they refine what their goal is more.
• 6:34
  SPEAKER_00: So before that, they might have been, oh, I think that the money is gonna be for buying another house down the track, you know, like I'm paying down my mortgage, but we want to get a bigger house in the future.
• 6:44
  SPEAKER_00: So we're gonna invest in and build up some money for that or whatever.
• 6:48
  SPEAKER_00: And then as you go through and you work out the time frame and the risk profile and all of these things, you might find out that actually they they think of things as they go.
• 6:57
  SPEAKER_00: And they're like, do you know what?
• 6:59
  SPEAKER_00: But we actually will need some of the money for this.
• 7:01
  SPEAKER_00: So we'll need that portion sooner.
• 7:04
  SPEAKER_00: And maybe I actually would like the idea of some of it just not being touched at all.
• 7:08
  SPEAKER_00: Like I want to have some that's just for the future.
• 7:11
  SPEAKER_00: So then you end up with either we can kind of like meet in the middle, like maybe it's a balanced fund because we know that we're gonna be accessing money across different time periods, or we split it out into different investments that are fit for purpose for each goal.
• 7:26
  SPEAKER_00: But as you do that risk profile, it helps people to really think through the logical next steps of when they're gonna get the money and what it's for and how much they need in there.
• 7:36
  SPEAKER_02: I love this.
• 7:37
  SPEAKER_02: So, challenge to you is next time you come, you're gonna bring the quiz and we're gonna make it fun.
• 7:43
  SPEAKER_02: And I mean, I'm more than happy to answer it live as well.
• 7:46
  SPEAKER_02: So we could do a bit of a fun game.
• 7:49
  SPEAKER_02: That sounds like a good plan.
• 7:50
  SPEAKER_02: All right, you could locate me in the I think because I think I'm conservative.
• 7:54
  SPEAKER_02: Really?
• 7:55
  SPEAKER_02: No, I think I don't think you are.
• 7:58
  SPEAKER_02: I think uh I I can take risks, but I think they need to be calculated risks.
• 8:02
  SPEAKER_02: Like I go, okay, how much money am I able to part with?
• 8:07
  SPEAKER_02: Yeah.
• 8:07
  SPEAKER_02: If things go wrong completely.
• 8:09
  SPEAKER_00: Yeah.
• 8:10
  SPEAKER_00: And the other one that I have in my questionnaire that again I haven't really seen with others is for whatever fund we're talking about, whether it's KiwiSaver or an investment or whatever, how what percentage of your overall wealth is this fund?
• 8:26
  SPEAKER_00: So people kind of think of it as like, oh yeah, I'm happy to take a risk.
• 8:29
  SPEAKER_00: But actually, if that's like 90% of what you're relying on to buy a house or to retire on or whatever, then maybe we just need to protect it a smidge more.
• 8:39
  SPEAKER_00: Whereas actually if this fund is just 20% and I've got houses and business and in in investments, God, I can't say the words, all over the place.
• 8:49
  SPEAKER_00: And this is just like a tiny thing, sure.
• 8:52
  SPEAKER_00: Go for like the absolute maximum risk that you want because you can afford that.
• 8:58
  SPEAKER_00: You can afford to take that risk.
• 9:00
  SPEAKER_00: Yeah, yeah.
• 9:01
  SPEAKER_00: So that's another aspect.
• 9:03
  SPEAKER_02: Okay, awesome, guys.
• 9:04
  SPEAKER_02: Thank you so much for listening up.
• 9:06
  SPEAKER_02: And if you've got any topics you want us to cover with Elizabeth, she is our regular go ghost.
• 9:14
  SPEAKER_00: It's not Halloween anymore.
• 9:18
  SPEAKER_03: I'm so sorry.
• 9:19
  SPEAKER_03: She's a regular guest.
• 9:21
  SPEAKER_03: I combine two words together because in Russian it will be ghost.
• 9:26
  SPEAKER_03: And I said Russian word was an English accent.
• 9:29
  SPEAKER_03: So this is how we ended up as a ghost.
• 9:32
  SPEAKER_03: But hey, at least uh hopefully that brightened up your day.
• 9:35
  SPEAKER_02: Um yes, if you want us to cover anything specific when it comes to investments, please let us know.
• 9:40
  SPEAKER_02: We are here for you.
• 9:41
  SPEAKER_02: Thank you so much and see ya.