Hawes book offers sage advice to grandson

Martin Hawes with grandson Ashton.

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PROLIFIC PERSONAL finance writer Martin Hawes is back in print with a book of letters to his three-year-old grandson Ashton – a book he hopes will help the boy avoid the errors that hinder the aspirations of most investors.

In Letters to Ashton, Hawes, who has sold more than 100,000 books to New Zealand readers, attempts to crystalise the lessons of his investment lifetime into a form personal enough to reach his grandson many years from now.

"These letters are what I want to say to my grandson when he grows up," Hawes says, a gift of experience and love from a grandfather who was besotted with his grandson the moment he laid eyes upon him.

The idea came to him as Ashton turned two and he was looking for a gift that would become an heirloom. Sharemarkets were in turmoil and Hawes found himself wondering why people seemed doomed to repeat wealth-destroying cycles of boom and bust.

Hawes acknowledges the Ashton of 20 years from now might not see himself as a man who is interested in money, but like the rest of us, says Hawes, he will have to take an interest because at some stage we all need investments.

Two principles form the bedrock of his investment philosophy.

The first is to be an investor, not a speculator.

Investors are interested that the price they pay is based on tangible measures of value, most importantly, the income an investment produces. Speculators attach little importance to the income an asset generates. They are after capital gain.

Investors must understand, Hawes says, that there are fundamentally only three investment assets classes: business (shares, corporate bonds, private equity, etc), income-producing real estate, and deposits (banks and government bonds).

Buying commodities such as non-income generating precious metals such as gold, or sinking money into art or antiques is speculation, he insists.

The second of Hawes' guiding principles is to be contrarian, to see booms for the traps they are and busts for the opportunities they present.

"You should know that the wonderful opportunities will come at the times when the world is in turmoil, when we seem to be about to slide back into the dark ages," says Hawes. "And the really dangerous times are when the world is full of optimism and confidence. The best time to be investing is when there is blood in the streets."

It is not easy being contrarian in such times. In 2007, Hawes warned residential property was overvalued and his statements met howls of outrage from vested interests, who argued once again that this time things were different.

Hawes says he likes to think the letters he has written will mean his grandson does not have to learn the hard lessons for himself, but deep down he recognises most people do.

GIVEAWAY: The Sunday Star-Times has 10 copies of Letters to Ashton to give away, courtesy of publisher Penguin and the GoodReturns online bookstore. To be in with a chance to win simply visit www.goodreturns.co.nz/winbooks and fill in your contact details.

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