Issue #9 – 4th November 2019

3) Control over their time and their life

How do you manage healthcare costs?

Good health is something that many take for granted.  When that good health disappears, life’s reality around how fragile we really are suddenly emerges. 

Bad things can happen to good people. 

How do you make provision for when you or your family’s health becomes seriously compromised?  You can just deal with it when it suddenly emerges, offload some of the costs onto an insurance company and/or, set aside a sinking fund yourself.  A combination of these three approaches represents the starting point for a framework that might be useful. 

At WISEplanning, over many years, we have recommended major medical insurance, alongside your own sinking fund, as a useful way to make provision for some healthcare costs.  Simply, when it comes to insurance companies, some medical insurance plans are better than others.  Anyway, the point is to make sure that you target those insurance premiums on to the biggest risks, use your sinking fund for those mid-sized risks and then for those small risks (such as the common cold or a broken leg), they are risks you can just deal with as they emerge.

Do you have a solid framework in place (beyond just medical insurance)?  Is it properly structured? 

Oh – the biggest medical costs usually arrive after age 70, FYI.  

If you need some help, just get in touch. 

Financial Planning

Positioning for Success

How do you know that you have got the right medical insurance policy? 

Ironically, the most commonly used company, Southern Cross, has not scored well in the past and yet it is by far the most popular medical insurance scheme used by Kiwis around New Zealand. 

At WISEplanning, we use an independent research house that ranks insurance companies including their actual medical insurance policies. This helps us to properly advise our clients as to which particular insurance carrier and specifically which medical insurance policy might be best. 

Once we have identified that scheme, to support and compliment the policy, we can look to set up an insurance sinking fund which initially is simply a bank account or a managed fund into which, for example, $100 per month can be regularly contributed.  Over time, it adds up. 

When things go seriously wrong with health, there is the backstop of New Zealand’s healthcare system, which is very good.  BUT, as many have discovered, it is not the total solution.  Indeed, it has limitations.  Having your own major medical insurance policy that covers off those significant costs, alongside your own medical cash fund, in an increasing number of situations, offers a real advantage.

Click here if you would like to know more about how independent research houses rank your medical insurance scheme. 

Mindset Alignment

Align your behaviour with your goals

What does risk management have to do with mindset alignment?!  In our experience at WISEplanning, more than you might imagine. 

For example, we all agree that a simple approach to things is normally a good approach.  That is different though than being simplistic.

A simplistic approach to risk management might be … I will deal with it when it arrives, regardless of what it is.  This is a great strategy but works only until it does not. 

The point here is that sometimes we all suffer from blind spots or we believe in things that, under close scrutiny, are just simply not true. 

In other words, we convince ourselves of a certain position because it suits what we want to believe, whereas facing up to the truth might be unpleasant or worst still, having to admit that we were wrong in the first place! 

There is plenty of evidence that shows those who are open-minded, happy to question the current position or beliefs and are well adjusted enough, that they can admit they were wrong and move forward, tend to progress at a faster pace than others.  They tend to be better off. 

Mindset alignment might be just words on a screen to some.  To others, they know mindset alignment is all about their behaviour and they also know it is a core driver (or impediment) to their long term success.

Investing

Price is what you pay; value is what you get

What is the best way to measure the performance of your investments?

The most common approach is to look for indexes or market averages and compare the growth the cash up value of your assets with those market averages. 

For example, in New Zealand, the likes of QV.co.nz and the Real Estate Institute offer different measures using property indexes that residential property investors can review to compare their properties with.  Do property investors do that comparison regularly? 

When it comes to the so-called “share market”, there is a vast array of share market indexes that are used for comparison.  The idea is that you compare the rise or the decline in the cash up value of your portfolio with an index that is similar to your portfolio. 

For example, if your portfolio was a selection of global companies, you might look at the Morgan Stanley Capital Index (MSCI) and compare your portfolio with that index.  Similarly, if your portfolio was totally American shares, then you might compare the rise or decline in the cash up value of your portfolio with that of the S & P 500 or the Dow Jones. 

Academically, there is validity around such a practice.  That said, for us as value investors, those indexes do not represent an accurate comparison. 

The short of it is that, the best way to measure the performance of your investments is to consider your investment goals and your investment requirements, then match your portfolio to your goals and your investment requirements.  That is because investment indexes bear little resemblance to your goals and investing requirements.

“It’s important to have a plan.”