http://www.windsorwealth.co.nz/

Windsor Wealth Management, 526 Victoria Street, Hamilton (2026)

01/11/2025

Amazon reported strong earnings on Thursday and had an immeidate 13% share price increase.

I think it is because they have been a laggard out of the mega caps in the last few years while attention has gone to Nvidia, Meta, and Alphabet.

The longer Amazon's share price lags, the greater the chance that good news will now impact share price because the company is not priced to perfection.

At some point (and maybe we have just reached it) it will be Amazons turn out of the tech companies to get a large bump in share price.

Conversely Meta has had a great run in the last 3 years, and announced very good results on Wednesday but they dropped 15% since then. The problem with being priced to perfection is that sometimes we don’t get perfection!!

01/11/2025

I wanted to share an update on Berkshire Hathaway, because over the last six months it has been somewhat out of favour.

When enthusiasm in markets leans strongly toward certain areas, other strong businesses can drift out of the spotlight. That is what has happened here.

It is worth recalling how differently Berkshire behaved earlier this year. In April, when the wider market pulled back by around 16 percent, Berkshire rose by approximately 4 percent. This ability to hold steady, and sometimes rise, during periods of nervousness is one of the reasons it is part of your portfolio. It is often at its most valuable when markets become uncertain.

Right now investor attention is focused on large technology companies. Many of these businesses are producing real earnings growth and innovation, so the market’s interest in them holds some justification but there will prove to be pockets of frothiness also. When attention becomes concentrated in one area, other high quality companies can appear quiet for a time. This does not mean anything is wrong. It simply reflects the short-term voting nature of markets.

That is why it is helpful to look at the fundamentals. Berkshire’s most recent results announced last Friday were strong.
• Profit increased by 17 percent compared with the same period last year.
• The company holds more than $350 billion dollars in cash and short-term bills. To put this into context Berkshire Hathaway holds more cash than any company in the world, and there are only 30 companies in the world with a larger market value.
• Insurance operations performed well, particularly GEICO, which posted meaningful underwriting profits.
• Manufacturing, service and retail businesses showed steady growth.
• BNSF Railway continued to improve operations and pricing discipline.
• The only area under pressure was the energy division due to previously known wildfire-related costs. There was no new negative development.

The most important strategic feature remains the large cash position. This provides flexibility. If markets correct or valuations fall in certain areas, Berkshire has the ability to buy high quality assets at more attractive prices or repurchase its own shares when they represent value. It can act from a position of strength rather than reacting out of necessity. This patience has served it well historically.

Berkshire does not need to be the best performer in every phase of the market to earn its place. It is held to reduce downside risk, to provide resilience, and to compound steadily over time. For most clients, an allocation of roughly 10% to 35% of their portfolio remains sensible.

Overall, the fundamentals are strong, the business remains disciplined and the cash position provides optionality as well as emotional reassurance for investors. Berkshire continues to play the role it is meant to play.

Here is a 6 month chart and a 30 year chart of Berkshire’s share price performance. You choose which is more important!!

07/10/2025

Mortgage Structure Update

The Official Cash Rate is currently 3% and is expected to fall again today. Economists forecast it could reach around 2.25% by the end of the year.

Interest rates in New Zealand have been falling for some time and are expected to continue trending lower as the Reserve Bank supports a slowing economy. GDP fell 0.9% last quarter, inflation is easing toward target, and business confidence remains soft.

In this environment, the focus is not on whether rates will fall, but how far and how fast they will continue to move. That makes it important to think carefully about how your mortgage is structured.

The one year fixed rate is currently our most preferred option for refixes and new lending. It is also the choice most of our clients are selecting.

It usually provides the lowest rate available and gives you flexibility to refix sooner if rates continue to move lower. Staying close to the market allows you to benefit earlier as reductions flow through.

While the one year term is preferred if you have to choose one, splitting your mortgage across different fixed terms remains an effective way to manage risk.

A split structure smooths repayments and avoids having the entire loan refix at the same time. It balances flexibility with security.

For example

50% fixed for one year to capture lower rates sooner

30% fixed for two years for added stability

20% fixed for three years for longer certainty

This approach ensures part of your loan adjusts as rates continue to fall, while part stays protected if the pace of cuts slows.

When longer terms may still suit

A longer term such as four or five years can provide peace of mind if you value absolute certainty or have a tight budget.
In a market where rates are continuing to decline, these terms will often cost more over time, so they should only be chosen where stability is the main priority.

No one can predict the exact path of interest rates.
Rather than trying to pick the perfect moment, focus on building a structure that fits your goals, cash flow, and comfort with risk.

Interest rates in New Zealand have been falling and are expected to keep falling toward a base near 2.25%

For most borrowers, the one year fixed rate remains the most attractive option, and splitting across different terms continues to be an excellent way to manage risk and maintain balance.

This is general guidance only. The right structure depends on your cash flow, loan size, and long-term goals.

Contact us to review your options and build a mortgage strategy that fits your situation.

12/08/2025

Bond Funds: Why Active Funds Are Best

When it comes to bonds, active management appeals over low-cost passive funds. The reason is simple: lower risk, and with that lower risk, we’ve seen higher returns.

1. The Numbers

Looking at KiwiSaver conservative funds over the past five years:
• Milford Conservative Fund (active): 4.3% p.a. after fees
• Simplicity Conservative Fund (passive): 1.9% p.a. after fees

That is a 2.4% annual difference. Despite charging higher fees, the active fund has delivered more than double the return.

2. Why Active Has the Edge with Bonds:

Low-cost bond index funds often hold long-duration bonds. These are more sensitive to interest rate changes and can lose value quickly when rates rise.

Active bond managers can shorten duration, adjust credit quality, and position the portfolio to reduce interest rate risk and preserve capital.

3. Bonds Serve a Different Purpose

With shares, you accept volatility in exchange for growth. Bonds are different. They are usually there to reduce volatility and provide stability in your portfolio.

If your bond fund is more volatile than it needs to be, it is failing its core purpose.

4. What We’ve Seen:

In recent years, particularly in periods of rising interest rates, active funds have generally provided lower volatility than passive funds, better capital preservation, and higher returns after fees.

Bottom line:

When the role of bonds is to lower risk, it makes sense to choose funds that actively manage that risk. For bonds, active management has not only reduced volatility but also produced higher returns.

05/08/2025

At Windsor Wealth we keep clients informed with what is happening in the markets and what our take is. Here is our recent letter to clients.

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I’m writing to give you a quick insight into the latest market movements. Despite a backdrop of constant uncertainty, markets have moved forward since April — a month when markets fell hard, and headlines screamed even harder. Back then, markets were down around 15%, and the outlook appeared bleak. Tariffs, inflation, political uncertainty, and it felt like things could get worse before they got better.

But as it turned out, the worst didn’t arrive. In fact, we’ve seen a series of US trade deals with Japan, the UK, and the EU, and now there’s pressure mounting on China to reach agreement as well. Tariffs still have an inflationary effect and will create cost pressures, but overall, the outcome so far has been less damaging than expected, and sometimes, that alone is enough to lift markets.

From the April lows through to the end of June, markets rallied back to all time highs. A big part of that momentum came from anticipation that earnings season would hold up better than feared. Now we’re in the thick of those earnings announcements. Around 80% of companies have beaten expectations. But because markets had already priced in some optimism in June, share prices haven’t responded much to the good news in July. On average, companies that beat earnings expectations are only up around 1%. Meanwhile, companies that disappointed have been sold off heavily. For example, Spotify dropped over 10% after its results this week. Novo Nordisk, one of the market favourites of the past year, fell more than 20% in a day.

So this is the current state of play, markets have moved forward strongly not because everything has gone perfectly, but because many things turned out to be less bad than expected. That’s often enough for markets to rise. And when markets run this far, this fast, in a still uncertain environment, there’s better than a half chance they take a breather. But there’s also every possibility we see another leg or two higher.

One of my favourite reminders in moments like this comes from an old Fidelity study. They looked at the best performing group of investors across their platform, and found that the top performers were people who had passed away. Why? Obviously, they weren’t reading headlines. Or checking prices. They were, quite literally, doing nothing.

It’s a good reminder with investing, as in life, things are usually not as bad as they feel in the moment, but they’re also rarely as good as they seem when everything’s going up. Holding that balance in your emotions and your expectations is key.

28/04/2025

Time for us to give an update on Mortgage Structure.

With economic signals shifting and interest rates hanging in the balance, the current climate calls for a strategy that acknowledges there is a high level of uncertainty. Here’s our take on what’s driving the market and how you can position yourself smartly.

New Zealand’s inflation has been cooling off, which has nudged interest rates down a bit lately—wholesale rates have softened, and retail mortgage rates are following, albeit slowly. Meanwhile global uncertainties such as Trump Tariffs could prove to be deflationary if the economy cools, or they could be inflationary with prices of goods increasing. With so much uncertainty the direction of interest rates is a coin toss.

A Smart Approach: Split Your Mortgage, Spread the Risk
Given this uncertainty—rates could rise with inflation or dip if global pressures ease—it is hard to go all in on one fixed term with high conviction that this is the correct strategy. That’s why splitting your mortgage makes sense. By staggering your fixed terms (say, part on a 1-year and part on a 2-year), you avoid having everything come due at once. It’s a practical way to hedge your bets: you lock in some stability now while keeping flexibility to catch lower rates if they drop later. In times like these, when the outlook’s murky, spreading the risk is the most rational approach we can take.

That said, the 2-year fix is the most popular choice with our clients after rates offered have dipped below 5%. The 2 year is offering a middle ground that’s neither too short nor too long. It’s long enough to shield you from a sudden rate spike but short enough to reassess if the landscape shifts by mid-2027.

Everyone’s situation is different—your cash flow, goals, and loan size all play a part. A split structure or a 2-year fix might be the starting point, but your mortgage strategy should be tailored to your needs so please reach out to discuss your personalised mortgage strategy.

17/03/2025

You’ve probably noticed news of financial market volatility, so I want to share my thoughts on what’s happening, what we expect to happen, and what you should do.

1. What’s Been Happening in the Markets Over the Last Month:

Financial news has hit the headlines, putting a spotlight on market volatility. The S&P 500 has dropped 8% in the last month, the Nasdaq 11.1%, and the NZX 50 reflects similar global and local pressures.

Trump’s tariffs—25% on Canadian and Mexican imports, 20% on Chinese goods, with threats of 200% on European alcohol—plus Ukraine-Russia tensions, are fuelling uncertainty. Businesses face tariffs shifting almost daily, like Mexico’s one-month delay, complicating investment and cost planning. Most top 500 U.S. companies warn these will squeeze earnings, and markets are factoring in lower profits and a potential slowdown.

Meanwhile, U.S. cost-cutting via the Department of Government Efficiency (DOGE) is hitting the public sector, adding economic and share market strain.

2. What We Expect to Happen to Markets Next:

Looking ahead, it’s easy to see a path of markets taking another step lower, but there’s also a chance of a rebound.

Tariffs, DOGE cuts, and geopolitical risks could weigh on earnings, and confidence. However, markets price forward—today’s news is baked in—so the next shift depends on how reality compares to expectations.

If the economy weakens more than anticipated, like US GDP dipping below 1%, share prices would likely drop. If the slowdown’s less severe, a bounce is possible. In the short term, psychology drives swings—many investors treat shares like a horse race, betting on ups and downs in individual companies. But as a real investor, you’re an owner of businesses, holding a piece of company profits, not just a wager on price moves.

Consider large companies such as Amazon or Uber: down heavily this month, yet their earnings in 5 or 10 years are unaffected by current newsflow. Buyers can buy a slice of the same future profits at a cheaper price than a month ago. Watchful buyers may step in at these levels. If not they will leap in at lower levels..

The next leg—lower or higher—rests on new developments: tariff updates, economic data (e.g., U.S. GDP April 24, CPI April 9), or April earnings results. Better-or-worse-than-expected outcomes will set the direction.

Also we are only talking about the US so far. While they are cutting government spending, there are countries in Europe such as Germany who are increasing government spending and likely to see an economic boost.

3. What Should You Do:

If you are a long term investor and not invested in concentrated bets, it is best to do nothing. If we tried to adjust our investments for adverse newsflow we would get it wrong more often than not, and the diversified portfolios we recommend will perform extremely well over the longer term.

During COVID, markets crashed 30% as economies froze—many expected another 20% drop amid business failures and job losses, but there are always reactions and interventions to market crises.

With the COVID crash the reaction was interest rates plunged, governments borrowed heavily, property markets became buoyant, and that 30% dip became a buying opportunity, not a sell signal, despite grim headlines.

Today, worsening news could shift fast—tariffs might resolve, rates could drop. Markets often defy certainty.

Our defensive philosophy at Windsor Wealth NZ focuses on resilience—funds and companies that are easier to hold through real crashes, because although we expect the market to be much higher in 20 years, we expect about 3 crashes along the way.

• Evidence-based funds give you a stake in thousands of companies, favouring cheaper, profitable ones with less froth, more margin of safety.

• Berkshire Hathaway is actually up 7% this month, buoyed by safety-seeking investors, and a huge cash pile ready to snap up bargains if the markets head south.

• Active managers we back have already been cautious leading into this volatility, increasing investment in Europe, and currently keeping a watchful eye out for bargains in US, but not jumping yet.

We will keep an eye on upcoming economic data releases and earnings reports in the next 6 weeks, that will have an impact, and report back to you, and until then remember that there is always something for markets to contend with, yet they find a way

12/02/2025

Moving your UK pension to New Zealand means wrestling with the wild world of currency exchange rates. It's like trying to predict the weather in Wellington - not easy. A lot of people focus on securing a good FX rate before transferring their pension, but I don’t think it's as crucial as you might believe. Here’s why:

Transferring your pension can take around 6 months, and during that time, trying to predict where the GBP/NZD rate will land is like playing darts blindfolded. FX rates are among the hardest things to predict. In fact, I've jokingly commented that the best way to make money on FX might be to do the opposite of my predictions! Being reliably wrong is just as valuable as being reliably right!

Your money in a UK pension is probably invested in worldwide assets, so you don’t actually own GBP. You own a mixture of assets from different countries. If you transfer your pension to NZ, you'll still hold a mix of worldwide assets; you've just changed the reporting currency. To simplify, if your UK pension owned 1000 shares in Apple, and you wanted to hold the same in NZ, the GBP/NZD rate is irrelevant for the transfer. You own the same asset, and you're still spending in NZ.

However, there's a small window of FX exposure to consider. When UK pension assets are sold into GBP cash and transferred to NZ, there's a brief moment where you're at the mercy of the GBP/NZD rate until new assets are bought. This window is short, unpredictable, and shouldn't dictate your decision to transfer. It's a brief window of uncertainty that you'll face regardless of when you decide to make the move.

When Your Pension Arrives in NZ:

Upon arrival, your funds will be in GBP cash, and you can choose to invest in GBP assets if you wish, but here's why that might not be the best approach:

• Diversification: Sticking solely with GBP assets limits your investment universe and increases your risk.
• Timing Conversion: Trying to time your currency conversion can become a stressful and costly guessing game.

A Practical Approach to Currency Conversion:

Instead of trying to outsmart the market, when funds arrive in NZD, we usually employ dollar cost averaging to mitigate risks in both FX and investment markets:

• First Week: Invest 30% of your GBP funds.
• Following Weeks: Invest 10% each week for the next seven weeks.

This strategy:

• Mitigates Risk: Spreading your conversion over time means you're not all in at one potentially bad rate or market timing.
• Reduces Stress: You avoid the emotional rollercoaster of trying to win or lose on FX or share market timing.

Transferring your UK pension isn't a massive FX gamble and shouldn't dictate your transfer decision. With dollar cost averaging, you're not chasing the high of perfect timing; you're ensuring you don't fall into the pit of bad luck. In the unpredictable world of finance, sometimes the best strategy is to focus on not losing rather than trying to win big. It's like playing tennis against an amateur - you don't need to hit the lines to beat me, just try not to make a mistake!

Remember, each personal situation is unique, and what works for one might not work for another. Before making any investment decision, it's wise to seek qualified financial advice to ensure your strategy aligns with your personal financial goals and circumstances.

12/02/2025

With investing, it is impossible to reliably predict short term market movements, but if we are not greedy we can invest in companies where we can be confident that long term performance will be very good. Accenture is one such company that many of our clients have a holding in. This is a recent update we sent to clients.

I hope this email finds you well. I wanted to share with you some insights regarding Accenture, a holding in your portfolio, and why I believe it continues to be a sound investment.

Accenture: A Slow Burner with High Return on Capital

Accenture stands out as a company with a consistent track record of delivering value. Its business model is not about quick wins but rather about sustainable growth. The company has demonstrated a high return on capital of 24% which is a probably the most important measure for an investor as it represents what you as an owner are receiving. If a company can sustain a high return on capital, the share price will follow in the long run with very similar returns.

This characteristic has made Accenture a "slow burner" in the investment world but reliable. It has provided long-term performance without the volatility often seen in more hyped-up companies.

Positioning in the AI Gold Rush

In the current landscape where AI is transforming industries, Accenture is well-positioned to benefit significantly. The analogy here is that you want to be the person selling picks and shovels during a gold rush; while many companies are racing to implement AI, Accenture is providing the expertise and consultancy services necessary for companies to transition. Recent reports indicate that Accenture's generative AI bookings have seen substantial growth, suggesting an increasing demand for their services in this domain. This positions Accenture not just as a participant but as a facilitator in the AI revolution, potentially leading to robust revenue streams from consultancy and implementation services.

Recent Performance and Market Perception

Over the recent weeks, Accenture's share price has performed well, reflecting increased investor awareness in their ability to benefit from AI consultancy. What's particularly appealing about Accenture is its under-the-radar status. Unlike many tech companies that are frequently discussed on platforms like CNBC or Bloomberg, Accenture does not suffer from an overhyped share price. This lack of media spotlight might mean that its stock is not as inflated by short-term market sentiment, offering a more grounded investment opportunity.

Portfolio Diversification

While we are optimistic about Accenture, it's important to maintain perspective. Individual holdings like Accenture should remain a relatively small percentage of your portfolio, as anything can happen with any company. However, if we could find 20 companies with Accenture's characteristics we would have a very strong portfolio.

29/01/2025

You've no doubt caught wind of the Nvidia saga, where the world's largest company took a significant hit, dropping 17% in a day and losing $589 billion in market value. This wasn't due to Nvidia's performance but rather the stunning rise of an AI upstart named DeepSeek, which developed a model that outperformed industry leaders like ChatGPT and Claude, but at a much lower cost, which has led to concerns that Nvidia’s processing chips will not be in as much demand as expected.

The DeepSeek Surprise:

DeepSeek's story is one of those rare, captivating tales in tech where a newcomer seemingly comes out of nowhere to challenge the titans. They've not only disrupted Nvidia but also overtaken established AI models in performance metrics, showing the world that in AI, the next big thing could be just around the corner, and the use of AI could disrupt the other Mega Cap tech companies that have looked invincible for decades.

The Common Query: Profiting from AI

Many of you have asked, "How do we profit from the AI boom?" Here's where the analogy of betting on a horse race comes into play. Investing directly in AI companies is speculative at best. History is littered with examples from the train era of the 1800s, the chaotic birth of the automotive industry in the early 1900s, and even the dot-com bubble where most direct investments in tech innovations led to losses and often complete wipeouts. It can be easy to pick the right theme but very difficult to pick the right companies.

A Strategy for All Seasons:

Instead of picking individual AI winners, we prefer an evidence-based fund approach to be sure to capture the benefits of AI:

Indirect AI Gains: These funds invest in a broad spectrum of companies, almost all of which will naturally harness AI to streamline operations, reduce expenses, and increase profits. This strategy ensures you're part of the AI wave without the risk of picking the wrong horse.

Resilience Against Overvaluation: An evidence-based fund provides a margin of safety by focusing on fundamental factors like cheapness and profitability. This approach contrasts sharply with basic trackers that allocate based solely on market capitalization, leading to an ironically concentrated portfolio where the top 10 companies make up approximately 40% of the index, while the other 490 companies account for 60% of the S&P 500. This method avoids concentration risk, offering a more balanced exposure to market growth, based on fundamentals.

In essence, the Nvidia and DeepSeek stories are fresh reminders of how quickly the landscape can change in tech. The takeaway is not to shun innovation but to approach it with a strategy that captures the benefits of AI across industries, rather than in a single, speculative stock. We want to avoid “horse race” bets, and use smart tracker funds that will not become excessively concentrated and avoid exposing you to an "expensive market" when there is actually plenty of value outside of the top 10 US megacap companies. A fund allocation strategy based on fundamental analysis ensures both resilience and the potential for reward in a market where the largest companies are expensive and facing increased competitive pressures.

05/12/2024

Time for an update on Mortgage Structure in Today’s Market

On the mortgage rate front, we have enjoyed a good run recently, with mortgage rates easing following OCR announcements. Earlier this year, fixed rates peaked at 7.19%, but we’re now seeing rates around 5.79%. While this is welcome relief, the question is where we are going, and what should we do with out mortgage structure.

Currently, bank margins are high at around 2%, suggesting potential for competition to drive rates lower even without OCR cuts. However, businesses are becoming more optimistic expecting an improvement in business activity (from a low base)

Stronger customer flows could lead to higher prices as businesses look to recoup lost margins, creating a risk of an earlier-than-expected rise in inflation, which could place some upwards pressure on interest rates.

Having said this, the economy has been bad, and an improvement in business activity might not be too inflationary at all.

On balance we still favour the shorter term fixed rates such as the 1 year, but given this uncertainty, it’s wise to avoid having your entire mortgage come up for refix at once. A split structure—where you divide your loan into portions with different fixed or floating terms—spreads your exposure. If rates fall, you can benefit from shorter-term fixes; if they rise, longer-term fixes provide stability.

While a split structure is often a good strategy, it’s not one-size-fits-all. Your personal circumstances—income stability, financial goals, and risk tolerance—should guide your mortgage setup. That’s why tailored advice is essential to ensure your structure aligns with your unique needs.

If you'd like guidance on structuring your mortgage, we’re here to help.

Windsor Wealth Management

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