Depending on the location, age, present condition, construction materials and method, local weather and any council imposed notices - particularly a Section 36 note relating to landslides - insurance companies can decline to insure, or offer less cover than you are seeking.
Quite often, we have to decline to insure a house because some aspect about it is too risky. This can be devastating to the buyers.
It is a good idea to call your insurance company and obtain a quote before signing your life away, and ensure there are no surprises in store.
If you have signed an unconditional contract with the vendor, serious financial consequences can result, notably losing your deposit, as well as a lot of unnecessary stress and frustration.
Buyers beware! Look ahead and protect yourselves against these unforeseen problems before you go unconditional, irrespective of what the real estate agent tells you.
A.Nasty suspicious me thought, when I first started reading your letter, that if I "looked beneath the surface" I would find somebody seeking a free ad - or advising people to ask for an insurance feature that only your company offers.
But you seem genuine.
I must say I didn't think it would be hard to get house insurance, unless the place was teetering on the top of a cliff or on low-lying land by a river.
Apparently I was wrong. So, house buyers, you have been warned. And the advice seems easy enough to put into practice.
If a seller or agent did object to your adding "subject to insurance" to a contract, you would have to wonder what was worrying them.
I read with interest correspondents' suggestions that financial advisers should be paid only if their clients' investment returns were positive or exceeded a certain benchmark.
I am one of those rare advisers - possibly the only one in the country - who charges on the basis of performance only (10 per cent of gains made by clients' portfolios).
The state of international sharemarkets during the past three years demonstrates why.
Although I enjoyed average returns for individual clients of 32 per cent and 45 per cent in 1998 and 1999, I have in the past couple of years produced negative returns for clients due to my exposure to the said international markets.
Because of my relatively low overheads (including no staff), and the fact that I have part-time paid employment, I have survived. But this is not an option for the average financial adviser who would be out of business if they charged as I do.
I presume you don't pay the clients when returns are negative! But good on you. You are really putting your money where your mouth is.
While you say it's not an option for many advisers, perhaps some of them could charge some clients based on performance, and get steady income from other clients.
Or they could set up a Rainy Year Fund before they start.
Once things get rolling, they should be able to cope with lumpy income. If a financial adviser can't budget, who can?
Q.I belong to the Society of Technical Analysts (STANZ) and am not a committed share trader, but I do have an understanding of how technical analysis works and how it differs from value investing in the markets.
Experts I have met pass on their own methods and personal patterns and disciplines of trading.
I have met people who are prepared to be disciplined, follow a carefully prepared trading plan, stick to a budget, never get emotional, spend a lot of time looking at charts and are positive about the results, but the results are personal to them and their attitude to the rules.
The positive results are not got by copying a magic formula or waving the same magic wand as the teacher, but rather by working hard at developing a modus operandi which is unique and buried deep in the psyche of the individual. It's not for everyone!
You certainly drew some fire from your original comments. I regret that responses were directed at your noble personage, rather than the issue for discussion.
A.Thanks for an insider's view.
For the uninitiated, technical analysis, or charting, is basically looking for patterns in share prices and related data, in the hope that you can use that knowledge to trade profitably.
Here's another insider's view.
A.I read the letters to your column two weeks ago with a wry smile for two reasons.
Firstly, you know that there is no strength to the opposition's argument when they attack the person and do not debate the issue. You won on that score. Secondly, I used to belong to STANZ. I joined them after an article in the Herald and went along to many of their presentations.
I did not invest any money at this stage as I wanted to be fully informed and as knowledgeable as possible.
One evening after a presentation by one of their senior members, I asked: "How often do you get it right in picking a stock?" I was flabbergasted to hear the reply, "Probably only 50 per cent of the time." After all the back slapping, I expected a result approaching at least 80 per cent.
I have since terminated my membership and rely on sound advice from a financial adviser in whom I trust, along with reading several very good publications.
This has had its ups and downs, but less than the markets, and I am in it for the long haul.
Keep up the good work.
A.I certainly wouldn't spend time on a trading system that is right 50 per cent of the time.
Given that share prices rise more than they fall, any random method of stock picking ought to be able to manage 50 per cent.
For some new perspectives on charting, I turned to Professor David Emanuel of Auckland University's Department of Accounting and Finance and to a recent newsletter from stockbroker Brent Sheather, who sometimes writes for Weekend Money.
First Emanuel: "Most serious analysts of the share market are still highly sceptical about the merits of charting. They remain to be convinced."
Among the issues Emanuel has looked at is the use of filter rules - you buy after a share has risen x per cent from its low and hold until the shares falls x per cent from a subsequent high. Then you sell, and maybe even sell short - a strategy that brings you a gain if the share price falls.
Emanuel used a whole range of different x values. The only case where there were small profits to be made was with very small values of x. "But you'd have to be in and out of the market all the time. You'd be murdered on transaction costs".
He continues, "In my view it is close to impossible to trade on patterns in share price changes.
"There are patterns there when you look back at the past sequence of prices. But they break up moving forward in time.
"You buy two shares on the basis of similar past patterns. One continues to rise but the other one heads south."
Sheather quotes from a new book, Practical Speculation, by Harvard University Finance Professor Victor Niederhoffer and journalist Laurel Kenner, which "looks at charting from all the different angles, including head-and-shoulders patterns, adjustable moving average charts, regression lines, Fibonacci retracement levels, advance-decline lines etc etc etc."
Using 102 years of data, "they discovered that there were no useful trends; all they found was results consistent with randomness.
"The authors thus concluded that chartists' reported results, good and bad, were best explained as being due to chance."
So why do people use charting? Sheather quotes a US Federal Reserve report: "People are prone to see non-existent connections between groups of things. They tend to be overconfident in their own judgment. And they remember pleasant or successful experiences with far greater clarity than they do unpleasant experiences."
* * *
Thank you In the past couple of weeks, this column has included several highly critical letters. But I have also received some supportive letters, which I really appreciate.
Here are excerpts from a few:
* "We always look forward to your weekly column and find your responses to be full of sound advice, humour, compassion and common sense. We wanted to let you know that without your weekly reassurance we would feel bereft."
* "I feel I must apologise on behalf of the male sex who possess a sense of humour for the intemperate first letter in your column two weeks ago. I'm sure 'our man in Southland' was being funny when he wrote. I know your reply made me laugh. Agree with all you say re chartists etc. Been down all those roads. I now have gone straight."
* "Often you adopt a strong view, for example, supporting index funds and hourly advisory fees, or opposing trading strategies. But you have also shown willingness to publish opposing views and to shift your own view over time."
* And the biggest eye opener: "Your basic principles have been mine for 20 years. In that time, an original investment of $60,000 (borrowed) has grown today (after substantial losses in the UK) to over $2 million in the UK, over $2 million in Australia, over $2 million in New Zealand, all equities, and under $2 million in bonds - all in NZ dollars."
Wow! In case anyone thinks that following my principles will bring them rewards that big, it probably won't. This man must have been pretty lucky. Still, it shows what good old common sense can sometimes deliver handsomely.
* * *
Mary Holm is a freelance journalist and author of Investing Made Simple.
Email us your question about money
Or post it to:
Money Matters
Business Herald
PO Box 32, Auckland
