Investors are rethinking their strategies after two decades of excesses, but a financial planner warns government priming of economies could create fish hooks for future generations.
Peeyush Gupta, a strategic policy adviser with Ipac Securities in Sydney, told a seminar in Dunedin this week organised by New Zealand Financial Planning, that funding ballooning government debt and the pension and medical expenses of retiring baby boomers, could see a tightening of entitlements for middle-income earners.
That made it more important than ever that people planned for their retirement, he said.
The world had never seen such a fiscal stimulus as was being injected by governments at present, a move he said had succeeded in avoiding a deep recession in the short term.
But eventually that borrowed money had to be repaid, at the same time as there was a significant threat looming in unfunded pension, social security and medical liabilities from an ageing population.
A logical response for governments to meet those costs was to increase tax and reduce entitlements, which made it even more important for people to save for their retirement.
"It means individuals need to take more responsibility for looking after themselves."
Those saving for their retirement were returning to the four basic investment principles of quality of investment, value, diversification and time, he said.
They were principles some investors and investment companies had ignored for the past two decades.
He said one investor told him he had diversified his portfolio by investing in four property companies, a tactic Mr Gupta said was not diversification according to the interpretation used by financial planners.
Common sense had been cast aside as investors bought heady investments that appeared to offer rich returns, but in reality resulted in the permanent loss of capital.
While all investor portfolios had struggled recently to make money, Mr Gupta said those who had not followed the quick dollar and had adhered to the four basic investment principles would recover more quickly.
"Junk can go up, but junk is just junk," he said in an interview.
Mr Gupta believed the recession had prompted people to rediscover some lost values, such as the value of families and communities and to realise that chasing wealth did not bring happiness.
"This next phase will be a good thing because it will take us back to basics, take us back to our roots."
AXA Global Investors chief economist Bevan Graham told the same seminar the world economy was not necessarily getting better, but "less bad".
The depth of the recession was also more apparent, he said.
