The Tactical Approach
For everyday shmucks like you and me to benefit from technology, we rely on operating systems. Software unlocks the potential benefit contained in the hardware. In a similar way, each investment we make involves both the asset itself, and an operating system – or what I’d call a tactical approach.
A tactical approach is the methodology or operating system that your investment strategy employs. It can vary depending on the asset class, the market conditions, and your personal preferences. Your tactical approach can be whatever you decide. Apply a different approach to each asset class or make it part of your master strategy—it’s entirely up to you.
For example, with shares, you can use a value investing approach: choose specific stocks in companies trading below their intrinsic or book value. Or you can use a growth approach: choose companies more for capital appreciation than dividends. Or you can rely on the rising tide floating all boats approach and dollar cost average into low-cost passive index funds – you could do just that, or form a core-satellite approach with other concentrated investments as well.
Gold is another good example: you can hold it to speculate on the collapse of the debt-based USD-denominated financial system, or if you prefer a more digital dystopia, hold bitcoin as well, or instead.
Why Property Investing Requires a Different Mindset in 2024
A tactical approach is critical when it comes to property. 2023 was a year that inflation really hit home for a lot of households in NZ, and the activity around property really changed from my perspective. I help people in my day job make decisions about property with or without a mortgage. So the data takes a back seat, and I observe behaviour first and foremost.
Everyday investors aren’t automatons reacting to migration and unemployment statistics. Emotions influence our financial decisions, and there’s often a disconnect between our stated intentions and the true motivations behind our actions. This is why it’s critical to be clear on the tactical approach, or operating system, that you use with property.
Are you trying to climb up a property ladder while doing minor renovations? Are you a property flipper? An amateur developer? Are you holding for long-term cash flow, or are you owning a home simply to be in the right area for the kids? Whatever it is, update your operating system occasionally. Learn about what influences inflation and interest rates.
If your tactical approach to property relies on cash flow, capital gains, or a combination of the two, you need to pay attention to what central banks do. I feel are the most important things to obsess about with property are inflation and interest rates. They affect both your net cash flow and the rate at which property values increase.
Meet Sharon Zollner, the Chief Economist at ANZ
To help us understand these concepts better, let me introduce you to Sharon Zollner, the chief economist at ANZ. She became the chief economist in late 2017, after working as a senior economist at ANZ since 2010. She started her career as a macroeconomist at the Reserve Bank of New Zealand in 1998, and has also worked at the Central Bank of Norway.
Sharon is well-known for creating the Truckometer in 2012, which is an indicator that can be helpful in painting a picture of true economic activity within the country. The Truckometer uses traffic volume data from around the country to measure the level of economic activity. It has two indexes: the Heavy Traffic Index, which reflects the current state of the economy, and the Light Traffic Index, which leads the economy by about six months.
Sharon is also a frequent commentator on economic issues in the media, and has a knack for explaining complex topics in a simple and engaging way. She is one of the most respected and influential economists in New Zealand, and I’m very excited to have her on the podcast.
