New to Investing (NZ)

[lbdance]

I am interested in opinions, and recommendations for reading etc with regard to Investing in stock in NZ

Our situation is that we have bought a house, and are approx 2-3 years away from paying this off completely. Up until the start of this year, we had increased our repayments for principal etc, but this year I have also changed the structure so we have a portion floating with an offset account (BNZ total money). Previously we were saving a small amount per fortnight for an 'emergency fund' type situation. Now that we have the offset account I feel that we no longer need to keep increasing our emergency fund. So I would like to use some of that fund (plus the amount that I will now have available for investing each month ~$500) and put it in some sort of alternate investment other than our house.

I have tried to read up on the likes of Smartshares, but feel that I could use some general advice on Investing etc. Any comments or suggestions welcome
I have readhttps://forum.mrmoneymustache.com/investor-alley/new-zealand-investing/ however this seemed to move away from suggestions and more towards tax information.

Thanks in advance

[nz]

You didn't mention kiwisaver. I presume you've got that under control?

I would start by watching and tracking both NZ and international share-markets and some specific companies in order to get a feel for things.

Many here will suggest index funds and whilst there is nothing wrong with that strategy I think there is much to be gained/learned from dabbling with a few shares that feel right for you. Eg a utilities company that is fairly steady and pays a reliable dividend. Once you feel comfortable you might want to take on a bit more risk further down the track.

Sounds like you have your housing well under control, well done!

[enpower]

What kind of investing do you want to do?

- Property
- Shares
- Managed Funds
- Your own business

I assume you are in kiwisaver already?

[Aught3]

General advice for investing in stock in NZ,

I try to have a 50:50 split between my local share holding and overseas. Local here includes Australia as the NZ market is very small and the correlation between Aus/NZ is close enough to basically ignore any differences. Investing locally you have lots of decent options:

-buy directly on the ASX/NZX sharemarkets through Direct Broking or ASB securities
-buy NZX-listed ETFs (Smartshares)
-invest in managed funds (e.g. through Rabodirect)
-passive "fund of funds" with Superlife
(There are probably lots of other, these are just the ones I am most familiar with)

Buy directly on the ASX/NZX sharemarkets through Direct Broking or ASB securities
To go this route you probably want to have at least $60,000 to start with. Trades should be at >$6000 to minimise the brokerage cost, so not a good way to "drip-feed" savings into an investment. Direct Broking is very slightly cheaper (last time I checked) but ASB securities is very convenient if you are already with ASB (I use ASB). By choosing the right shares on the ASX you can avoid the annoying tax issues brought up in the other thread. You can also buy US/UK shares this way but it looks tricky and I'm holding off on it for now.

Buy NZX-listed ETFs (Smartshares)
Easy exposure to 10 - 50 NZ/Aus companies with fairly good liquidity. Expense ratios are high for ETFs but they are not too bad. The SmartOZZY at 0.6% is the cheapest way to get Aus stock exposure that I know of from an NZ-based product. Again your initial investment should be over the $6000 mark to minimise brokerage but after that you can enter their savings program to "drip-feed" in regular savings without this brokerage charge. They also offer a DRIP which is handy. The downside is they are only local investment options although I have heard they are looking at more ETF options, hopefully with some international exposure, in the near future.

Invest in managed funds (e.g. through Rabodirect)
Rabodirect have a nice series of actively managed funds with a diversity of investment choices. These are funds from finance companies (e.g. Tyndall, AMP, Fischer, etc). The stock options here include local, international, emerging markets, and growth (both local and international), so you can tailor your investment choices based on your risk profile. For managed funds, their management fees are pretty low (approx 1% - but it varies) and you have to pay a 0.75% purchasing fee when you buy, there is no selling fee. The minimum is $250 which makes it easy to set up a diverse portfolio.

Passive "fund of funds" with Superlife
Superlife offers a similar set of funds to Rabobank. You can easily select a range of local, international, and growth stock and control the percentages. Even better, they have automatic rebalancing which makes this a very simple investment choice. My understanding of what they do is create a passive fund of passive funds which keeps management fees low. I think they offer stand-alone investments as well as Kiwisaver funds. I’m currently looking to switch my Kiwisaver over to them but don’t know as much about them as the other options I listed above.

Hope this is helpful and that other people can chime in with their experiences/ideas around NZ investing. There’s probably a lot that I still have to learn.

[lbdance]

Thanks for the info to date.

Yes we have got Kiwisaver sorted. I am enrolled, my husband is enrolled in his work scheme which is better than Kiwisaver

In terms of investing, property is not something I want to get into at this stage. If we were to shift, we would probably keep this house (with a small mortgage and have it tenanted so it was cash flow positive) but that is not on the cards for a couple of years at least.
Own business - both of us do a small amount of freelance type work as it is already, this goes through a family business (to keep tax etc legal). Looking to setup our own company, but it would never be for a full time option, only to have the capacity to do other work easily.

I was more thinking stocks / managed funds.
Information about ASB / Rabo Bank was interesting as I already have other accounts with them, so that may make it an easier first step to investigate.

[the lorax]

Hi
I looked at the Superlife website - can anyone comment on how reputable/secure Superlife are? I saw something about them getting into trouble with the Financial Markets Authority for how they were selling Kiwisaver and saw something else about them refusing to be rated for their financial security. Also the website just seems a bit low tech - are they kosher?

FWIW I bought some Vanguard ETF shares via ASB online sharetrading - I figure the transaction fee isn't too bad if I keep the shares for years and their annual management fees are much lower than the Rabodirect ones - I have a small amount with them too - it's great that their minimum amount is only $250!

[Aught3]

Hi thelorax,

I can't comment too much on the security of Superlife as I haven't started using them yet. I remember that story about one of their reps trying to sell outside a WINZ office. Not a good look, but it was a few years ago and there don't seem to have been any problems since. Haven't heard anything about them refusing to be rated. I know Mary Holm uses them if that means anything to you.

I'd be interested to hear more about your experience with the Vanguard ETF. Which one did you buy? What are your long-term investment plans? Did you find an easy way to deal with their dividends?

I'm pretty torn between trying to go with the local Superlife or the overseas Vanguard for international stock exposure, any tips to help make it simple would be great!

I can talk more about the managed funds available through Rabodirect if people are interested or have questions.

[the lorax]

Hi Aught3!

I bought some Vanguard ETF shares through ASB online broking - it's easy enough, just you have to ring rather than making the transaction online. I went for their Australian Shares ETF which tracks the top 300 companies in the ASX:
https://www.vanguardinvestments.com.au/retail/ret/investments/etfs.jsp#etfstab
Their fees are lower than the NZX Smartshares options plus you get all top 300 in one whereas with Smartshares you have to choose either the biggest 20 companies or go for the next tier down. They also have ozzie large and small caps, a US ETF and an everywhere but the US ETF!

The other ones I'm considering are iShares who have also have a good reputation, a bigger range, but higher fees. I also read that Smartshares are thinking of expanding their range of ETFs. The advantage of using Smartshares or Superlife should be that the foreign investment tax is sorted out for you. I don't quite get that tax and the IRD website isn't very helpful. I don't get how they treat kiwisaver for it - the FIF tax applies if you have a foreign portfolio over $50,000 but I'm not sure if foreign share holdings in your kiwisaver fund count towards that and, if they do, how you're supposed to know the value of that. My fund just lumps them all together in the statements with Australasian shares.

Vanguard Ozzie funds allow dividend reinvestment -means that sorting out the dividend cheques is no hassle. The Vanguard US and ex-US ones don't but ASB (and the Direct Broking guys) have foreign currency accounts with low fees (may be 50c) for depositing the cheques and you can hold the dividends as AU dollars rather than converting so then presumably you can buy on the ASX without having to re-convert to AU dollars.

I like Rabodirect for ease of buying funds and for the low entry amounts and fees (I'm only investing small amounts ever) but the annual fees for those funds are quite a bit higher - the on I have is 1.35% compared with 0.15% for the Vanguard one. I figure if I keep hold of the shares for more than 3 years the lower annual fee with the Vanguard/iShare ETFs makes up for the higher initial entry fee (approx $40 NZD last time I bought vs 0.75% of deposited amount with Rabodirect).

Hope that makes sense. the high transaction fees are a pain when trying to save up for FIRE in this part of the planet!

[Aught3]

Thanks for the info, really helpful.

The Vanguard Australian Shares ETF looks like a better product in every way compared to the SmartOZZY ETF I currently have. I think I'll look to make the switch when market conditions favour it. If it is only 50c to deposit an AU$ check that would be great.

Looking through the Vanguard and iShares ETFs on the ASX it looks like an investor could build a properly diversified portfolio from them. You've got fixed interest, bonds, US shares, EAFE shares, emerging markets, local REITs. I didn't see any global REIT ETFs though. I think this is the direction I ultimately want to go. What I have to do is decide whether to do it through ASB securities and pay the higher fees or open another brokerage account with say E*trade and buy directly in the US. It's hard to know!
Edit: From what I've read the double exchange risk of NZ<>AU<>US is equivalent to the NZ<>US exchange risk, or is at least close enough to not worry about it.

I think the way Kiwisaver is treat wrt FIF is the same way other locally-based investment entities are treated. They work out the tax for you and you don't count it towards your $50,000 limit. But it's very confusing and I could be wrong.

1.35% for a managed fund seems very high. Are you sure there isn't a lower cost alternative? The highest I pay is 1.25% for a global property fund and that's only because I couldn't find anything cheaper. In Rabodirect, from memory, you can pay as low as:
0.6% local bonds
0.7% global bonds
0.75% local stocks
1% global stocks
1.25% local/global property

[lukeNZ]

Hi all,

Hoping it's ok to jump on the coat tails here.

As a young couple (late twenties) we've worked hard, not traveled and
been able to pay our house off (benefits of living in the provinces;
family homes can be had for <300k in nice areas, you just have to be
less picky with your career). We both have
kiwisaver in a balanced fund and are on contributions holidays but
both still contribute $87/month and I have a work super scheme, again
a balanced fund. We also have a couple of small term deposits. I think
we have our low and mid risk sorted and think we need more equities or
perhaps some REIT's (not keen on a rental in case I lose my job and we
have to move). As NZ has no low fee index funds that I can see
(Superlife isn't a true index tracker and smartshares are expensive),
I'm wondering what your thoughts on buying ETF's (probably Vanguard)
on the ASX given the FIF problems once we eventually get over 50k in
the distant future? Or better just to buy domestic passive
psuedo-tracked funds (ASB or Superlife) and avoid the currency/ tax
problems?

[nz]

Lukenz- i like your idea of buying some REITs. Their prices are remakably stable and of course they have juicy dividends. Have a look at Goodman property Trust and Kiwi Property Trust, look back over the last decade, 2007 crash included, and see if their prices/ dividends fit your appetite for risk.

[lukeNZ]

Hi NZ,

I know a little about Kiwi as a got a scholarship for Uni (pays to ask, was surprised how many are around) and my 'mentor' was running kiwi at the time. From memory they have lots of westfield shopping malls (amoungst other things). Not sure I direct buy but try to get a bunch of them in a single fund?

Cheers

[Aught3]

I'm wondering what your thoughts on buying ETF's (probably Vanguard)
on the ASX given the FIF problems once we eventually get over 50k in
the distant future? Or better just to buy domestic passive
psuedo-tracked funds (ASB or Superlife) and avoid the currency/ tax
problems?

For simplicity it's probably better to buy the local funds rather than look overseas. They do have higher fees but are also likely to be tax-advantaged (PIE) entities. The main problem is the lack of choice on the domestic side of things especially compared to what is available in the US. I will say that buying cross-listed Vanguard ETFs on the ASX is probably not the way to do it. I looks better to buy these via a US-based broker than go the long way around. The ASX-only ETFs are, of course, only available on the ASX and can easily be brought via a NZ-based broker.

Given that you already own your own house (i.e., local property) from a diversity perspective it would be better to go for international stocks or at least stocks in general. A balanced Kiwisaver account in your 20's suggests you are fairly risk-averse so I'm not sure how that squares with wanting to buy REITs.  Apologies if you've already thought about this but perhaps check out the calculator at https://www.sorted.org.nz/calculators/investment-planner to see what kind of investor you are and report back? If you just want to add risk/return to your portfolio the best way is probably changing your Kiwisaver from balanced to growth or aggressive. Since the money is already locked away for 40+ years, a riskier strategy has loads of time to pay off or at least recover from a financial disaster if one were to happen.

If you are sold on the idea of a REIT fund perhaps consider smartMIDZ. It holds Argosy, DNZ, Goodman, KIP, Precinct, and Property for Industry. Plus you get exposure to a bunch of midcap NZ stocks like Xero, Vector, Air New Zealand, etc. One of the criticisms of this fund is that it is too property heavy, but that may be an advantage for you. The 0.75% fee sucks but from what I've found you're not going to get anything cheaper from the NZ market. On the ASX, VAP (Vanguard A-REITs) at 0.25% looks super-cheap comparatively.

[the lorax]

Hi
possibly a daft question but what do you mean by 'cross-listed' on the ASX wrt Vanguard ETFs please?

Also- it looks like Superlife and ASB use Vanguard and iShares/Blackrock ETFs for their own funds (charging an extra fee on top of course)  that would mean they are index trackers wouldn't it?

I'm trying to figure out if the fact that PIEs have slightly lower tax rates compensates for the higher annual fees - must depend on what dividend rates are like so I guess it varies over time.

[the lorax]

and Aught3- yes the Rabodirect fund I chose has high fees- it's because I went for one with an ethical screen. It looks like Superlife do one too which has much lower annual fees so I"m going to rin ghtem this week and check them out!

[Aught3]

Hi
possibly a daft question but what do you mean by 'cross-listed' on the ASX wrt Vanguard ETFs please?

It means the funds that are listed on more than one stock exchange. VTS for example is listed in both the US and in Australia.

Let us know what you find out from Superlife.

[lukeNZ]

Aught3,

Not set on REIT's and as you say I could do with some more share exposure, I'm thinking international and maybe hedged. I also probably should set both our kiwisavers to growth funds given our property and cash position. My work super is Ethica (may be what your considering thelorax?) which is fixed at a balanced-ish allocation. Ethica appears to me to be passive with a layer of company screening at purchase time over the top.

I'm thinking that if I already have Ethica with superlife I ought to use asb for the repackaged Vanguard and iShares/Blackrock ETFs to spread the risk?

[Aught3]

Currency hedged funds would be useful if you could find them but there just aren't that many. Rabodirect has an AMP global shares fund which is hedged but I don't know of any other options.

Spreading out the risk over different companies is not a terrible idea but don't use too many because that just makes it harder to keep track of.

[Aught3]

There's a new fund available on Rabodirect: Harbour Australasian equity fund. Until the end of the month you can get 50% of the normal entry fee. This fund has the lowest MER of all the Australasian share funds available at Rabodirect (1.06%) but also has a performance fee which some of the others don't. However, since this extra fee only gets charged in the good times you may think this is fair enough. Looking at the holdings they disclose (the top 10) the only Australian company is BHP Bilton. The Tyndall core NZ equities (1.00% MER) is still cheaper for NZ stocks and the other Australasian funds have more geographical diversity in their holdings. If the Harbour Australasian equity fund did shift towards holding more Australian stocks I think it would be a more attractive option for me. For now I am sticking with what I've got.

I had a look at the ASB Easyfunds, specifically the growth fund which is probably what most young investors should be going for. The MER looks like it is 1.21% with an entry fee of 0.45%. Just over 60% of its investments are global and over all it has 20% fixed interest and 80% stocks, with 7% of that being in property. The majority of the fund managers are passive (I'm only unsure of how Colonial invests). Overall, if I was looking for something simple which covered all the basic asset classes this fund would be a real possibility. Given that I want to tweak the percentages of asset classes and tilt my portfolio I would prefer to stick with the Rabo funds. Out of interest I calculated the MER on what will hopefully be my final holdings in my Rabodirect account and it came out to 1.2% so the ASB fund does not seem extremely expensive, but it is supposed to be a fund of passive funds so how much management does it really take?

[Buxlo122]

Hi
I looked at the Superlife website - can anyone comment on how reputable/secure Superlife are? I saw something about them getting into trouble with the Financial Markets Authority for how they were selling Kiwisaver and saw something else about them refusing to be rated for their financial security. Also the website just seems a bit low tech - are they kosher?

FWIW I bought some Vanguard ETF shares via ASB online sharetrading - I figure the transaction fee isn't too bad if I keep the shares for years and their annual management fees are much lower than the Rabodirect ones - I have a small amount with them too - it's great that their minimum amount is only $250!

I use super life for my kiwis aver they are great.
The issue that had with the FMA was to do with reporting after tax returns rather than pre tax returns. The FMA wants all kiwisaver scheme to report along the same basis for comparability between schemes. Super life we're want to show after tax returns as this is the true return to the investor.
Bit of a storm in a tea cup.

[jamface10]

Hi, I just wanted to double check. If I am starting to save money for short term use (travel - 1-2years, house deposit - 5years) am I best to keep it in a relatively safe savings account ie online pie account?