There were plenty of lessons for investors in 2024, as is the case every time we close the book on a calendar year.
The one that stood out for me was the need to ensure your investments were globally diversified.
If you didn’t do that and instead hunkered down in New Zealand assets, you didn’t enjoy the success you could’ve.
The local sharemarket had a great year in the end, with the NZX 50 index returning 11.4 per cent in 2024.
That’s above the long-term average and it was the best performance since 2020.
Almost all the gains came in the second six months of the year, when the Official Cash Rate finally started coming down.
Domestic fixed income was impressive too, with the NZX Corporate Bond Index up seven per cent.
That came on the back of a 7.5 per cent increase in 2023, which was the highest since 2014.
Property didn’t fare quite as well, with national house prices falling marginally last year and the listed property sector down three per cent.
If you left your hard-earned dough sitting in the bank, the return from cash in 2024 was 5.6 per cent.
Most of those returns are solid, but when you compare them to some international assets they look a little disappointing.
World shares were up 18.0 per cent last year, led by the US market which rallied 25.0 per cent (on the back of a similar gain in 2023).
Japanese shares were up 21.2 per cent, the Australian market rose 11.4 per cent while European, UK and emerging market equities posted high single-digit gains.
All those sharemarket returns include dividends, just like the NZX 50.
US Treasury bonds were flat and outside of the mainstream, gold rallied 27.2 per cent and Bitcoin surged a staggering 123.5 per cent.
There are some big numbers within that group, especially for a mere 12 months.
When you account for currency moves, it really rubs salt in the wound.
The NZ dollar was down 6.7 per cent on a trade weighted basis last year, declining against all our major trading partners.
It fell hardest against a resurgent greenback, falling 11.5 per cent over the course of the year from US$0.63 to $0.56.
That means American assets were stronger still in NZ dollar terms, with US shares up a staggering 41.2 per cent in 2024.
The currency was down ten per cent against the British pound, 5.6 per cent against the euro and 2.5 per cent against the Australian dollar too.
Those moves pushed the annual return from their respective regions up into the 15-20 per cent zone.
Whether it’s houses, shares or commercial property that spin your wheels as an investor, the lesson is the same.
If you had too much (or worse still, all) of your capital in local assets, you did yourself a disservice.
It’s true, 2024 was just one year and New Zealand won’t always be a laggard.
After all, in the decade leading up to the pandemic local shares outperformed international markets on seven out of ten occasions.
However, we’ve fallen behind since then as our economy has struggled more than most.
As workers, homeowners and small business owners, there’s not much we can do but stick it out and wait for things to improve.
Investors don’t face those same constraints, and it’s never been cheaper or easier to spread your wealth across greener pastures.
The NZX 50 is up 14.1 per cent these past five years, while house prices are 25.2 per cent higher.
That sounds reasonable when put like that, but the per annum returns (of 2.7 and 4.6 per cent) are less inspiring.
Meanwhile, US shares have almost doubled over that period, the Japanese market is up 86 per cent, while Australia and Europe have returned about 45 per cent each.
If you’ve been hunkered down in New Zealand assets in recent years, the gains you’ve needlessly left on the table are significant.
We live in a great country and there’s a more prosperous period ahead for us, but there’s no need to be “all in”.
The mobility of your capital means the world is your oyster and investors should take advantage of that.
These last few years are an example of why.
Market Insights enewsletter
Keep up to date with our fortnightly Market Insights enewsletter. Our research team provide timely and regular commentary and analysis on market developments, understanding investment jargon, and the impact of current events.
Mark Lister
Investment Director
Market Insights enewsletter
Keep up to date with our fortnightly Market Insights enewsletter. Our research team provide timely and regular commentary and analysis on market developments, understanding investment jargon, and the impact of current events.