The amount of money being managed by automated or robo-advisors has quadrupled in five years. CMC Markets NZ general manager Chris Smith sees the trend accelerating as new investors look to 'set and forget'.
New Zealand's share market like the rest of the world’s markets is currently going through a volatile phase.
“The market has given up two years of gains in the US. The local market is not faring as bad partly due to not having as many technology [sector] companies. But this is a tough time and scary period for first time investors. For many this will be their first bear [falling] market,” says Smith.
Smith sat down with Newsroom Pro Editor Jonathon Milne to discuss the factors currently impacting the markets and strategies for those who have recently entered the share market.
“The positive is that we have seen a whole new generation embrace share markets, they’ve got access [through fintech apps] they can check prices, look at research…cost is very low. One of the biggest innovations is how cheap it has got to access financial markets.”
Smith says it is a worry that current volatility will drive new investors out of the market but encourages the newbies to “zoom out” and look at the big picture.
“The markets have always out-performed over the long-term. Out-performed property and out-performed cash… I’ve learnt over my 20 years of investing that the markets are always there. The markets aren’t going anywhere. I’ve been through many crisis events…there is always something to worry about but most of the time the market will move through those crisis events.”
Smith says the current sell-off presents a buying opportunity, but the market could fall further until interest rates stop rising.
“There are tremendous opportunities to buy world class companies…but until we see that pivot in [interest] rates from the Fed [US Federal Reserve Bank] selling pressure will continue.”
Smith predicts the trend to automated investing – investing that uses algorithms to tailor investment advice to suit individuals – will rapidly increase its share of the investment market.
“Automated investing will be really popular for most consumers rather than being active in the share market on a daily or weekly basis.
“That kind of set and forget behaviour…It is not personalised advice, which is quite expensive to get in New Zealand… you plug into a system your goals, your risk appetite and the sorts of [investment] themes you are interested in…whether that is ESG or tech etc….and it comes out with a plan that you drip feed and invest over time. “
Disclaimer: This is not investing advice and should be read and viewed as general information. No opinion given in the material constitutes a recommendation by CMC.
