Author Topic: Advice wanted for New Zealand Investment Strategy please  (Read 7794 times)

Mickage1

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Advice wanted for New Zealand Investment Strategy please
« on: March 04, 2015, 10:12:48 PM »
Hello Mustachian's,

I discovered this website last night and have not been able to stop reading, judging by some of your discussions I can see there are many wise Mustachians whose advice I could benefit from greatly.


I live at the bottom of the globe in a little country called New Zealand. I am hoping to reconfigure my finances for the best returns possible however a lot of what you talk about on here does not directly relate to things in my country ( or do they? ) for example we do not have "Betterment" or "Vanguard" down here.

Here is my situation,

We live in a $675k house in a town where the cheapest house's sell for low 500's
As an ex tradesman I built the house efficiently with its own self contained residential apartment which creates $350 of rent for us per week, my family ( wife and two kids ) and I live in the main house.

We pay %5.1 on our mortgage ( as good a rate as you can get in this country ) of 420k which costs us $411 per week offset against our $350pw income from the self contained unit it is costing us $61 of bank interest to live per week so our house costs us very little to live in and my salary of 90k means we can live relatively easily.

Taking all of the above into account what I am wanting to know is should I restructure my mortgage, pull out my equity and put it into something that will return more than the %5.1 it is currently saving me and if so WHAT?

Thank you in advance for your help.

nzmamma

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #1 on: March 04, 2015, 10:16:22 PM »
hi. A fellow kiwi here. Welcome to the forums. I am just posting so I can follow the responses :-)

nz

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #2 on: March 04, 2015, 10:34:17 PM »
Another kiwi here. Sounds like you are doing rather well, and I am guessing you're in a major NZ centre.
If I was you I would continue to live where you are, keep collecting your $350 a week rent and I would pour every spare cent you can into your mortgage. (Make sure your kiwisaver is  maxed out too).

Mickage1

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #3 on: March 04, 2015, 10:53:40 PM »
Pleasant surprise to see some kiwis on here.

I do not have kiwi saver.

Pouring money into my Mortgage will earn/save me %5.1 however there are managed funds companies such as http://milfordasset.com
which show annual returns in excess of %10 which means because I am not mortgage free that any money I put into such a fund is going to cost me %5.1 which I can afford...
should I draw down 100k from my mortgage, stick it in such a fund to compound in interest at %10 per year and pay my bank $100 a week for the pleasure of doing so?
In theory every $100 I pay to the bank will be retuned to me one day double fold at a compounding interest rate.

Thoughts please?

nz

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #4 on: March 04, 2015, 11:24:37 PM »
I have quite a bit of money tied up in shares and funds both in NZ and overseas.......but I still think it makes sense to prioritise your mortgage first. Funds like Milford will have good years and bad years and they would be the first to tell you that they can not promise 10% next year. What is your appetite for risk? Could you stomach a loss if the markets turned?

You may want to invest some cash into shares/ funds but perhaps treat it as a learning experience .....remember at your age you have done extremely well and you still have many years ahead of you.

Mickage1

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #5 on: March 04, 2015, 11:40:37 PM »
Hi NZ,

Thank you for the reply, stashing as much cash in my mortgage though continuing to live frugally is good advice. Thats what has gotten me this far I just wonder what am I missing that could shift my finances from 1st gear into 2nd gear?

Assuming I am comfortable with a moderate level of risk what will propel me forward faster short of inventing something or setting up my own company how can I capitalise on the $250k of equity I have in my house?

nz

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #6 on: March 04, 2015, 11:58:46 PM »
With inflation running close to 0% returns on investments are probably going to be fairly modest in the forseeable future. So  a guaranteed 5% on your mortgage looks reasonable to me.

 I do sense your ambition however.....and the desire to make some money....

Your choices? Shares, bonds, property or some specialist area like art or classic cars?
All have their potentiel upsides and potential downsides....could talk all day.

I will share with you a recent punt of mine . At the moment the kiwi dollar is very strong compared with the Aussie dollar and energy stocks are very low. So I have bought some Australian oil/ gas shares. This is pure speculation on my part.....hoping for the best but prepared for the worst.
Remember I am at a different stage of life.....and can stomach the loss.

I am NOT reccommending this strategy, merely sharing my way of thinking.

Mickage1

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #7 on: March 05, 2015, 12:07:17 AM »
http://cmecapital.co.nz

check out the link above they seem to offer some pretty good rates.

I like your way of thinking re Aus energy stocks, long term they will go up and the kiwi dollar will never win against the Aus so it should be a double win when the time comes to cash in.

kiwigirls

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #8 on: March 05, 2015, 01:14:10 AM »
What is your risk appetite like? - with high interest rates come high risk.  I haven't heard of CME Capital and they don't have a credit rating on their website (that I could see).  Who do they lend their money to?  Remember all those finance companies that collapsed at the end of the last decade.  New Zealanders lost hundreds of thousands of dollars.

I understand you wanting to get FI sooner rather than later but many of us here are "slow & steady" kind of investors.  Remember that your Savings Rate is much more important than your Investment rate of return.  ie the less you need to live on the smaller your stache needs to be and the more you have to invest each month.

In the NZ context I think that repaying your mortgage is risk free and you get a (tax adjusted) return of 8%.  ie You would need an 8% return on a Term Deposit less tax to get you the 5.10% you save on your mortgage.  That said you have specialist skills as a tradesman and rental property may be a good way to go for you.  You can use your skills and time to improve a property & get tax free capital gains.  Especially if you are prepared to put in lots of your spare time.

If you are interested in share investing (as I am) the NZD is historically high against the AUD & we are buying a lot of stocks on the ASX - Vanguard & ishares Exchange Traded Funds.  We are counting on an eventually correction in the NZ/AU exchange rate which will improve our rate of return.   Of course at the moment its heading the other way and we are "losing" money on the exchange rate.

Hope that helps.  Always good to hear from other kiwis.

NZCashTash

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #9 on: March 05, 2015, 03:27:43 AM »
Hi Fellow Kiwis,

I've been trying out Harmoney, the NZ peer 2 peer lending site.  It's higher up the risk ladder, but might be a good home for a small portion of your cash, I recon I'll get about a 13-16% pa net return on investment.

But would agree with the others here, the tax adjusted 8% return from off-setting your mortgage is hard to beat for risk v reward.


Scandium

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #10 on: March 05, 2015, 06:10:41 AM »
I'm no kiwi, but those Milford funds sound terrible. Fees are high, and convoluted. For example:

Quote
1.15% p.a. capped management fee plus a performance fee equal to 15% of returns above the Investment Objective. Any international management fees  charged by International Fund Managers are in addition to any Milford fees and are deducted within the Fund
http://milfordasset.com/investing/pie-funds/fees/

That's almost hedge fund level of fees! You can't even calculate it until after the fact. As for the 10% return, you're confusing have and will. Just because they (claim) 10% return doesn't mean they will, while your mortgage is a guaranteed 5%. That said I would invest some in stocks too, but in an index fund, not in these managed, fee-laden funds. 

lise

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #11 on: March 05, 2015, 07:44:41 AM »
There's another thread on here for kiwi's but I can't find it ... it had some good advice.

One of them that I'm looking in to is www.smartshares.co.nz

And to the poster that is not a kiwi - we don't have a lot of low cost fund options out there like the US.  I think other non American's have complained about this also. 


Mickage1

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #13 on: March 05, 2015, 11:04:49 AM »
Thank you for the help folks, keep it coming.

zb3

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #14 on: March 05, 2015, 12:19:30 PM »
Nice to some other New Zealanders on here.  You are probably better off paying down your mortgage.  I don't think it's fair to say that it's equivalent to an 8% return on taxable investments given we aren't taxed on capital gains in nz or dividends if you use a company to invest as your dividends will be fully imputed, or if not you will only pay 5% tax when on our top marginal rate.  I also have some money with milford and am pleased with them although their fees are high.  I also invest a lot in vti, the cost is only 1.45 % including taxes (.05 fif tax x .28 company tax rate plus .05 management fee) which is not terrible given the kind of fees we are used to over here.  As the pe10 of the market is historically quite high perhaps u r best paying off your mortgage for now, it all depends how you handle risk.
« Last Edit: March 05, 2015, 12:22:17 PM by zb3 »

Mickage1

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #15 on: March 05, 2015, 02:58:32 PM »
It looks like two things are becoming clear pay down my mortgage or perhaps leverage the equity in my house into another property as a rental if I feel like taking on the additional headache and risk.

kiwigirls

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #16 on: March 05, 2015, 05:41:53 PM »
The other thing you MUST do is get your wife & kids enrolled in Kiwisaver (KSS). 
KIDS - OnePath & Westpac offer an KSS with an index fund option & you don't need to make any contributions - so you can just sign your kids up to get the $1000 kickstart and let the money grow for them. 
WIFE - You haven't mentioned your wife's income so assuming she is a SAHM so enrol her in a KSS fund & put in the minimum per annum so that she gets the kickstart and the $520 per annum from the government.  ASB do a fund with an index fund option and you only need to put in $100 per month.  That is a 43% return on her money even before investment returns.   
YOU -the minimum is 3% per annum of gross pay so $2700 per annum based on 90k income.  In return for that you will get $520 pa from the government on top of your investment returns.  All employers have to match the 3% - check with yours if they have grossed it up (ie pay it to you so you in effect have to contribute $5400) or will they match it out of their pocket?  Worst case even if you contribute $5400 you are still getting 520 from government which is a 9% return per annum before investment returns.

By contributing to you and your wife's kiwisaver you will get better returns than anywhere else & you will get exposure to the sharemarket via index funds. 

Mickage1

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #17 on: March 06, 2015, 12:29:19 AM »
Great tips regarding Kiwi saver, in theory what you are saying makes perfect sense and perhaps I am not capable of using the money myself to any greater advantage than that.

However I am on a kiwi saver holiday and have been since shortly after I first enrolled, possible ya giant mistake but I have bought and sold properties using every available cent of money at my fingertips and accumulated a few hundred k of equity.
I don't like the idea of having to wait until I'm old and retired to access the funds and I struggle with the idea that it is money that is out of my hands short term which I cannot use to become Financially Independant short term.

I had never even thought of enrolling my 3 year old daughter but I will since you have given me the bright idea, I'm guessing there is nothing to lose.

Yes my wife is a Stay at home mum.

Thanks for the help.

Mickage1

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #18 on: March 06, 2015, 12:41:19 AM »
Kiwi girls and NZ

I like your idea of investing in Aussie Stocks, I was talking to a friend of mine who works on oil rigs in Aus and he said they are down sizing and selling up rigs left right and centre due to low oil prices so what will happen ( although not over night ) is as we get low on oil prices will rise and because there is less being produced/available to keep up with demand oil shares should explode.
People are not about to stop driving their clown like cars willy nilly all over the country side are they!?

kiwigirls

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #19 on: March 06, 2015, 01:14:46 AM »
Great tips regarding Kiwi saver, in theory what you are saying makes perfect sense and perhaps I am not capable of using the money myself to any greater advantage than that.

However I am on a kiwi saver holiday and have been since shortly after I first enrolled, possible ya giant mistake but I have bought and sold properties using every available cent of money at my fingertips and accumulated a few hundred k of equity.
I don't like the idea of having to wait until I'm old and retired to access the funds and I struggle with the idea that it is money that is out of my hands short term which I cannot use to become Financially Independant short term.

I had never even thought of enrolling my 3 year old daughter but I will since you have given me the bright idea, I'm guessing there is nothing to lose.

Yes my wife is a Stay at home mum.

Thanks for the help.
Sadly the best actions to take are the boring safe ones - spend less than you earn, contribute to KSS & pay off the mortgage.  All the while family, friends and the news are all talking about property price increases, share markets, commodities, derivatives etc etc.  I struggle with the feeling that I am missing out on something... But MMM is right about a low information diet.  Whilst it is hard to do I try and remind myself not to listen to the noise & stick to the basics.

Runningtuff

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #20 on: March 24, 2015, 01:33:37 AM »
It sounds like you are doing really well - fantastic to have organised such low housing costs.
I would also plug Kiwisaver though. On your income 3% should be manageable and it mounts up nicely thanks to employer, tax credit and interest. Even if you RE, it'd come in handy later.

jaya_gibson

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #21 on: March 25, 2015, 07:52:42 PM »
RE: Oil

My brother works for a USA oil company - he's based in Africa mostly. He says that he expects a 20% layoff in the workforce in the next 2 months. Oil rigs are being sold left right and centre and no new staff are being taken on.

NZSurfer

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #22 on: April 12, 2015, 06:39:16 PM »
Quote
I don't like the idea of having to wait until I'm old and retired to access the funds and I struggle with the idea that it is money that is out of my hands short term which I cannot use to become Financially Independant short term.

I feel exactly the same in regard to kiwisaver. Having to wait till I'm 65 unless I'm basically dying to get access to it, puts me off putting much into that. I do the bar minimum to get the Govt $500 topup. Also unless I'm wrong it doesn't generate any passive income does it? In that regard I'd rather put that sort of money into stocks/funds etc where I have the choice to reinvest or pull out dividends. I'm self employed also, so I don't get any employer contribution which would make it more attractive.

I'm with those that suggest property. With your skills, I'd look to buy a house in a good area to renovate and rent or sell.

leftoverham

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #23 on: April 13, 2015, 12:04:53 AM »
Also unless I'm wrong it doesn't generate any passive income does it?


Your kiwisaver should generate an investment return which is reinvested back into your fund and compounds over the years till you can access the funds at age 65 (assuming the govt keeps the current rules) so you could just work out how much you'd want to afford your lifestyle when you're 65+ and put enough into kiwisaver to achieve this. I think theres actually an MMM article where he addresses this issue (using a 401k rather than kiwisaver). A good question might be "is it possible to put too much in your kiwisaver?"

For me I put in 4% pa which is matched by my employer and gets me the govt tax credits and then I invest in other assets alongside this.


louloulou

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #24 on: April 13, 2015, 01:37:27 AM »


For me I put in 4% pa which is matched by my employer and gets me the govt. tax credits and then I invest in other assets alongside this.

I do exactly the same with my kiwisaver. 4% to get max employer match + full govt. credit p.a.

I signed both my kids up to kiwisaver to get the $1000 kickstart when they where little. We do not contribute to them however my 7 year old has made $550 so far and my 5 year old $300. Kinda cool lesson on compounding interest one day for them.

Like others have said in this thread, we have chosen to focus on mortgage repayment. Boring as it is, I feel I would struggle to find a similar guaranteed rate of return presently.

NZSurfer

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #25 on: April 14, 2015, 12:28:58 AM »
One thing I noticed the other day when setting up my KiwiSaver through BNZ is that you can convert your FlyBuys into a cash contribution to you KiwiSaver account. I'm not sure if that works for all banks or is common knowledge but it seems like a good way to spend you points rather than on 'stuff'. Usually I always convert mine to Airpoint dollars, but think I'll do it that way from now on.

Slightly better payoff with the contribution also. 108 FlyBuys will give you a $20 contribution. 150 Fly Buys pts = 25.22 Airpoints Dollars.

leftoverham

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #26 on: April 14, 2015, 01:12:59 AM »
Good Idea, I think ASB is the only other provider that allows something similar with their credit card rewards (see here if anyones interested https://www.asb.co.nz/transfer-true-rewards).

I'm with SuperLife for kiwisaver so don't have that option but do channel all my spending through a cash back rewards card. I think I get something like $1 for every $100 spent which is better than some random stuff from a catalog!

louloulou

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #27 on: April 14, 2015, 02:23:58 AM »
Good Idea, I think ASB is the only other provider that allows something similar with their credit card rewards (see here if anyones interested https://www.asb.co.nz/transfer-true-rewards).



this is what I do, well worth it.

Tieke

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Re: Advice wanted for New Zealand Investment Strategy please
« Reply #28 on: May 07, 2015, 04:22:01 PM »
I'm so pleased to have found this thread.  My only investment at the moment is my kiwisaver fund (which is in Milford's Active Growth fund).  It's been providing a great return for the last 3 years, but I need to start investing somewhere else while I'm saving for a house deposit - I just don't have the capital to start investing in property yet.  So it's nice to see some options being put forward here!