The year ahead would be marked by lower returns, higher risks and more volatility.
"Like the Black Caps captain [Kane Williamson], stay defensive and play most things with a straight bat, quietly accumulate returns and pick off decent opportunities when you see them."
The NZX50 had more than doubled in the past five years, returning an annual average 16.1%. That was a golden run, well above the 9.1% average since the index came into being, he said.
The gross dividend yield on New Zealand shares was 5.8%, so investors should count on getting that, plus a few percent to account for steady earnings growth from most companies. Returns closer to the long-term average were the order of the day, not the double-digit rises enjoyed for the past few years, Mr Timms said.
The same went for property, he said.
"The gains of the last few years have been phenomenal but are completely unsustainable. In the last 50 years, house prices have risen by 2.8% more than the inflation rate each year, on average."
Holding more cash than usual was sensible, especially when there were so many risks. There were growing political tensions, rising interest rates, debt levels that were worse before the global financial crisis and everything looking expensive, just to name a few, he said.
However, that did not necessarily mean sitting on the sidelines and doing nothing.
"Being completely out of the market can be just as risky as being all in. There are still opportunities for investors and many high-quality companies will continue to deliver."
An inflationary rebound could be a big theme in 2017. The tight United States labour market might soon push wages up, which would inevitably flow through to broader price increases. Manufacturing prices in China had started to rise for the first time in five years and oil prices were 50% higher than a year ago, Mr Timms said.
Interest rates would probably keep going up and while they might not reach the highs of several years ago, they would be well above the lows of last year.
"This means investors need to strike a balance between staying defensive and keeping a healthy exposure to growth assets. I’d put my money on lower-yield, higher-growth companies performing better this year."
The local economy was in good shape heading into the year, he said. Migration, construction and tourism were all supporting the economy. Unemployment was below 5% and business confidence remained well above historic averages. The impact of a big rebound in the dairy payout could not be underestimated and it would benefit many provincial regions.
The general election would almost certainly create some nervousness, an economic "accident" in China could see New Zealand stumble, or a sharper-than-expected rise in interest rates could hurt some over-leveraged home owners, Mr Timms said.
"This might well be as good as it gets in terms of growth. Amass a few more offshore assets while the currency is strong, or at least add a few exporters to your portfolio."
