Investors are being told to prepare for lower rates of return on their investments over the coming year, than what they have become used to in recent years.
Photo: 123RF
Craigs Investment Partners head of wealth research Mark Lister said many investors had been getting an average of 18 to 20 percent returns on their investments over the past four years or so, but single digit growth in the order of 8 percent would be much more realistic in 2017.
"People will be wise to expect returns to go back a little bit closer to that long term average [of 8 percent]. I'm thinking mid-to-high single digits," he said.
Conditions had changed as global interest rates and inflation were on the rise again, he said.
While the darling of the New Zealand sharemarket had been defensive stocks, the shifting global environment, with increasing geopolitical risk, rising interest rates and inflation, provided good reasons to rebalance investment portfolios.
Mr Lister said investors should include more growth stocks in their portfolio, capable of outpacing rising inflation.
"You've seen interest rates rise all around the world and people are expecting that to continue because inflation is likely to rebound.
"Because of that I think it makes sense to ensure you have diversified investments and make sure you are exposed to assets that can grow in line with inflation."
He said companies that only paid high dividend yields, regardless of whether they provided any growth, would probably come under pressure.
"If you are in those higher yield securities, you have to avoid the ones that are all about yield, with no growth at all."