Kiwi Retailus Investo-Erectus: Part II

As a follow-up to my earlier Retailus post, (Infometrics economist) Matthew Nolan has just posted an excellent piece here.

Furthering the theme I laid down, Nolan also notes the confusion around risk/ reward trade-offs:

The lack of income growth stemming from this investment suggests that something is amiss – even if New Zealand has not really “over-borrowed” in the strictest sense, it appears we may have invested poorly. This misallocation of investment is the unfortunate result of a policy failure, bad luck, and further misinformation regarding the return/risk to investment.

Let's be clear - there's not only misinformation disseminated by under-educated and shady personal financial advisors/ retail brokers - the much bigger problem is retail investors' lack of understanding and knowledge of sound investing. This is compounded by the laziness in performing due diligence.

And then Nolan goes on to state (in far more polite terms than I did) how stupid NZ retail investors have been with their investment choices:

Ultimately, this implies that it is not even the fact we have accumulated debt that is of concern for New Zealand; it is what we have done with it. And in this sense it appears that New Zealand [retail investors] as a whole has made poor investment decisions. We have collectively whittled away a golden opportunity to improve the New Zealand economy by borrowing to invest in things that offered very little return.