It is always difficult to predict what is going to happen. Who would have predicted the pandemic, and the variety of responses, in 2020? Returns in 2021 are likely to be just as interesting. Events like the pandemic come and go but returns over the longer term are almost always positive. That said, and depending on your timeframe, the starting point is important.
Near term returns can move around a lot. They are very dependent on what governments and ‘experts’ say and do, and reactions to such. Governments are expected to keep interest rates low in the foreseeable future. They are hoping to fuel a recovery in earnings, which in turn should lead to employment and economic growth. Along with additional policy stimulus and increasing vaccination growth is expected to increase over time. On a positive note, the IMF (International Monetary Fund)1 recently raised its global growth forecast for 2021 to 5.5% from the 5.2% it anticipated back in October.
However, given what is considered to be current, by historic measures, high prices in both shares and bonds (low-interest rates) performances in 2021 could be up or down. Issues or events that could affect this year include developments around US policy, ongoing tensions between the US and China, the approach towards Iran, the level of global trade and initiatives adopted that might address climate issues. On top of all that no doubt developments around the virus will continue to have a big impact. In this environment, it pays to tread carefully / invest wisely. Our strategy remains to endeavour to participate well in the current market rally, while still preserving some measure of downside protection against what we believe to be “frothy” markets.
- The International Monetary Fund (IMF) is an organisation of 190 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
Your Christian KiwiSaver Scheme is unique in having direct investment in a pine forest in the southern Hawkes Bay, Hapua Forest.
Just like KiwiSaver, forestry is a long-term investment with a typical forest usually taking some 25 years to mature. Our forestry land value has soared in recent times as investors have come to realise the ability of forestry to provide a carbon offset.
We’ve almost completed harvesting our first crop which was planted as seedlings in 1992-1993 and since 2018 we’ve been steadily replanting our land. So far over 300,000 seedlings have been planted. The next photo shows an area of seedlings planted in 2018.
Replanting in 2020 faced some obstacles with COVID-19 affecting the availability of labour and the Hawkes Bay drought delaying replanting. Some of the forest land is also not suitable for replanting, we don’t plant along the banks of the waterways and there are areas of native bush that we wish to protect and leave to regenerate. See the photo below of an area of retained native bush.
In our October 2019 article, we mentioned that we source our seedlings from Murrays Nurseries Woodville. Seedlings are ready for planting when 25–30 centimetres tall and are mainly planted by hand. It’s labour intensive and done by skilled teams. The number of trees planted per hectare can vary from 600 to 1,400.
Radiata pine was first introduced to New Zealand in the late 1850s to see if it would be a good candidate for widespread planting. Its excellent growth rate prompted seed imports from California in the 1870s, mainly for shelterbelts and woodlots. By the first forestry planting boom in the 1920s and 1930s, it had been adopted as the species of choice.
It proved to be versatile and grew well throughout New Zealand on a variety of soil types, including coastal sands, heavy clays, gravels and volcanic ash deposits.
Logging is a big deal in New Zealand. It is our third largest industry after dairy and meat.
A third of the world’s radiata forests are grown in New Zealand, with Australia and Chile being other major producers. New Zealand now has 1.75 million hectares of planted forest, of which some 90 percent is radiata pine, much in first rotation forests. These forests cover around 7% of New Zealand, which’s about the same area as 10 Stewart Islands. A substantial part of New Zealand (24%) is also covered in indigenous (native) forest.
There are other articles on Hapua Forest in February 2019 and October 2019.
Like almost anything of value we own, your KiwiSaver account needs a little love and attention now and then. Let’s call it a health check. It won’t take long, and your KiwiSaver account will love you for it.
Look at it as a “do-it-yourself Warrant of Fitness”. We suggest it be done annually; perhaps at the beginning of each year or when you receive your annual member statement.
- Is your investment profile suitable for your current situation?
This is about where your funds are invested. Is your choice of investment funds too conservative, too aggressive or just right?
The Sorted website has a useful tool to help you called Investor Kickstarter at www.sorted.org.nz/tools/investor-kickstarter. You answer a few questions and it provides a guide to what type of investor you are, a typical investment mix for your type and what sorts of returns you could expect.
- Are you contributing enough?
If you can afford it, should you increase your contribution rate or make extra voluntary contributions?
If you have suspended making contributions, is it time to recommence contributing?
The Sorted website has another useful tool to help you with these questions, the KiwiSaver Savings Calculator www.sorted.org.nz/tools/kiwisaver-savings-calculator. You answer a few questions and it provides a guide on how big your balance could be at age 65 and how much you could get per week in retirement. Try different contribution rates to see the impact on your future savings.
- Is your Personal Investor Rate (PIR) correct?
You don’t want to have too much tax taken from your KiwiSaver earnings or too little and face a tax bill by having the wrong PIR rate. Your PIR is based on your income. If that changes, so might your PIR. We have a handy guide to help you with calculating your PIR on the scheme’s website www.christiankiwisaver.nz/documents.
If these three items are in good order, your KiwiSaver account should be running well.
Our staff are happy to help you with any questions you have on this.