Hi All
Welcome to my first thread on this forum. I've only just found this place and so far the money mustache is rubbing me the right way! Good job to all involved.
Anyway, I have a simple question which I'm pretty sure I already know the answer to, but I'd like to ask anyway in the hopes of getting more insight.
A quick background to start things off:
I used to be terrible with money, ABSOLUTELY TERRIBLE WITH MONEY! Consumer debt, lifestyle creep, all of it and more. About 5 years ago I tried to borrow even more money (while already around 15K in debt) and the bank said:
"NO! You suck with money - and we're not giving you any more of it until you sort your act out. Start saving and come back in 6 months." So I took a look at situation and did a bit of reading about the way money actually works - turns out the bank was right, and getting denied a loan was one of the best things to ever happen to me. Instead of a bright shiny BMW and a brand new Triumph Street Triple I went to work on my debt and managed to clear it off over around 1 1/2 - 2 years. Then I left my job to get a degree which I finish in around 6 months (20K interest free student loan [I live in NZ]).
I worked out a couple months ago that despite my current status as a broke assed student earning less than minimum wage (when compared to a full time working gig) I can still bank a small amount every week and have since put away tiny but growing sum of investment savings. This is in addition to what I have in kiwi-saver, which is the investment scheme we have in NZ. In six months time I will be earning a full time wage again and earning actual decent salary. I'm doing a bit of research and small sum investment now, before I have larger amounts to invest.
My question is on mutual funds. My savings is with the NZ branch of Rabobank, they have mutual funds available through various managers with a minimum purchase of $250 at a time. I've bought small amounts of a number of funds, around 70/30 growth/bonds and Fixed Interest. I'm now not so sure about the fees I have to pay - Each fund is slightly different but the general breakdown is as follows:
Entry Fee - one off fee - same for all funds - 0.75%
Management Expense Ratio - yearly fee - varies per fund - range between 0.83 - 2.33%
Max Management fee PA - yearly fee - varies - 0.7 - 0.4%
The cheapest overall fund is 0.75% entry + 1.49% yearly and the most expensive is 0.75% + 3.58%
All funds have all three fees. I guess what I want to ask is are these fees too high? It seems like a lot to be paying, considering that there's no guarantee that the fund will generate a profit on any given year. At 0.75 % entry fee I would need around a $4000 + purchase fee on a stock through the cheapest online broker ($30 per purchase) to incur the same entry costs, but would save money on reduced fees.
What I want to ask is this:
Would it be a better plan to save up more in a savings account once I've actually got real money to invest, and then purchase stocks and index funds through a broker?
I've never done any real investing before and I'd like to eventually purchase an investment property, but I also want to own stocks as well to diversify, and I won't have enough for a deposit for a good few years. I don't know s#%t about the stock market - I would likely just buy index funds and forget about them until they're needed, repurchasing as my savings increase. This seems like a solid plan to me - my living costs have been forced right down as a student, and I can happily chuck the increased earnings into savings when I go back to full time work.
Also, I'd very much like to buy into solar energy and 3D printing, if I can find mutual/index funds that invest heavily in these areas. Do these magical creatures exist, or are they just a figment of my mind?