John Ryder is a joint founder of Ryman Healthcare retirement villages, a founding director of Michael Hill, and the chairman of leading private equity investment company Direct Capital.
For 13 years he has written a regular newsletter on global investment opportunities and has been an owner and operator of businesses in over a dozen different industries.
Now he's just put his wide-ranging business experience into print with a guide for New Zealanders called Global Investing.
He talks to Kathryn Ryan.
Read an edited snapshot of their conversation
Kathryn Ryan: When you look at investment portfolio and you look at it circa 2016, what do you say about the relative advantages and what you should be weighing up between the different classes of investing?
I think the first thing to appreciate is that markets go in cycles…. I think it’s important you have to know where you are in the cycle, because cycles go on forever and the problem is that at the moment most of these markets are at the top of those cycles. And people say “well I have spare money” and everyone else is investing in this area so let’s get into it – that is a dangerous attitude. It’s better to say “look, let’s wait until the timing is better, let’s wait until there is a reversal to this market.”
KR: If you are someone who is in the position of either having a nest egg you want to protect or are trying to build one over the course of your working life those interest rates are what is skewing things aren’t they? And is this at the risk of not looking out over a whole cycle and appreciating at some point they will likely rise again?
Well, what’s happening with the share market is people are saying “look, we can’t invest in bank deposits because they’re paying us say 3.3%. But we can get a say 6 percent gross dividend yield from the share market and the share market has gone up for the last seven years, so let’s get into that.”
The problem is if you get into the New Zealand share market over the last 50 years that it is probably about 30 percent over valued today, so the risk investors are taking is to get about two and a half percent in the short term they’re facing the possibility that the market could reverse by up to 30 percent.
KR: If you’re someone looking to take on risk right now, and how much, what do you mean when you talk about “dancing in the door”?
What I’m saying in that regard is “join the party, but dance near the door.” You need to be in a position to exit if necessary. If there is a crash it’s actually a good time in respect to markets because they are better valued. But if you have all of your money in a market that has overreached itself, and you have geared to a large extent, and you have no further funds when or values get better then you are not in a very good position.
Do people somehow get infused with the idea that when peaks are happening whoever long they’re going to last for, that’s when you should be wading in when you might want to be bailing out, right?
When markets become extremely priced, it is import to adopt what I call contrarian investment. Which means that you may be shifting form the share market to the bond market, and when that happens the bonds go up in price, so when the reserve bank drops interest rates, bonds that you have bought with a good coupon rate go up in value.