Author Topic: New Zealand Investing  (Read 32689 times)

kiwichick

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New Zealand Investing
« on: December 15, 2012, 08:49:22 PM »
Not sure if there are many NZers on MMM, but figured I'd ask anyway...

Considering the lack of index funds in New Zealand, and the low-liquidity of many of our stocks, what would you consider to be the best option for a beginning investor, saving ~$200 - $400 a month:

1. Invest in managed funds. These come with high fees, with the only passively managed funds I can find being Superlife and ASB Easyfunds. Benefit of dollar cost averaging. Unsure how easy it is to keep an eye on the investment with these companies.

2. Invest directly in individual stocks, focusing on those with high liquidity. Due to the relatively small amount of stocks on the NZX and low initial investment amounts, it may be difficult to diversify adequately - though you could invest in the ASX as well. Brokerage would eat into profits (0.3%, min. $30).

... or option 3. put everything onto the mortgage and don't invest until it's paid off. Given our high interest rates, I'm leaning towards this one, but it does mean putting all your eggs in one basket until it's paid off.

I looked into investing in the ETFs listed on the ASX, however they appear to have very low liquidity. Ditto SmartShares.
« Last Edit: December 15, 2012, 08:51:04 PM by kiwichick »

nz

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Re: New Zealand Investing
« Reply #1 on: December 15, 2012, 09:13:01 PM »
As a fellow kiwi and having a few more years under my belt, my advice would be to definitely pay down the mortgage.
Life gets a whole lot easier once that monkey is off your back!
 Shelter is one of life's few necessities and if you get that sorted at a young age then you can look at investing elsewhere safe in the knowledge that you'll sleep well each and every night for the rest of your life.

I have a niece who is 24 and is currently making good money in Australia. She's just bought her first house with a $60k deposit and aims to be freehold by the time she is 30. Then there'll be time for kids etc. without the pressure to pay the man!
Sounds like you've got your head screwed on right kiwichick...pay off that mortgage asap and then we can talk again about the share market, property investments etc.

gooki

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Re: New Zealand Investing
« Reply #2 on: December 16, 2012, 12:43:13 AM »
In your case I'd pay down the mortgage. Guaranteed 5.25% return on your money vs a qualified PIE investment with a tax rate of 28% which means they'd need to be offering a return of 7.2% and no one is guarenteeing this.

On top of this make sure both of you are contributing to kiwisaver to get the maximum employer match (3% next financial year).

My wife and I successfully choose option 3, and are now in the process of having to find somewhere else to invest so i'll follow this thread closely. You can read more on our experience here:
http://www.mrmoneymustache.com/forum/journals/doing-it-slow-and-stead-journey/

Where are you getting the idea NZ stocks, smartshares (index funds) etc are low liquidity? (In comparison to any other sharemarket investment).
« Last Edit: December 16, 2012, 12:46:10 AM by gooki »

gooki

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Re: New Zealand Investing
« Reply #3 on: December 16, 2012, 12:48:54 AM »
http://www.interest.co.nz/

Keeps track of term deposits, along with bonds etc.

------------

http://www.smartshares.co.nz/

What mostly puts me off smartshares is the fees. 0.60 to 0.75% for an index fund. WTF???
« Last Edit: December 16, 2012, 12:54:36 AM by gooki »

kiwichick

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Re: New Zealand Investing
« Reply #4 on: December 16, 2012, 12:27:56 PM »
Thanks for the replies. I would likely end up repaying the mortgage as fast as possible anyway, but it's nice to have the idea reinforced. If I lived in the USA or UK with their low interest rates, it might be a different story.

NZ - that's pretty damn awesome of your niece. Mortgage free in 6 years would be a dream!

Perhaps I'm wrong about the Smartshares liquidity, but they never seem to have much turnover when I look at FONZ etc on ASB's sharetrading site. Am I right in thinking you look at the days volume and net turnover to get an idea of liquidity? Maybe I have it all wrong! And from their website it seems they only cash out large sums directly - $200,000 parcels from memory but I can't seem to find that info now. And yeah, their fees are stupid high.

Oh, and currently enrolled in my employer's superann scheme, which is much more generous than Kiwisaver and gets paid out when I leave - I count this as my secondary emergency fund in case of redundancy :-). Though I intend to pay in $1043 into Kiwisaver each year too to get the tax credits.

gooki

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Re: New Zealand Investing
« Reply #5 on: December 16, 2012, 01:54:07 PM »
Perhaps I'm wrong about the Smartshares liquidity, but they never seem to have much turnover when I look at FONZ etc on ASB's sharetrading site. Am I right in thinking you look at the days volume and net turnover to get an idea of liquidity? Maybe I have it all wrong! And from their website it seems they only cash out large sums directly - $200,000 parcels from memory but I can't seem to find that info now. And yeah, their fees are stupid high.

They state: buy and sell units when you wish
http://www.smartshares.nzx.com/resources/fact_sheets/tenz_fact_October.pdf

But might be worth giving them a call before you commit.

gooki

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Re: New Zealand Investing
« Reply #6 on: December 16, 2012, 02:05:39 PM »
Thanks for the replies. I would likely end up repaying the mortgage as fast as possible anyway, but it's nice to have the idea reinforced. If I lived in the USA or UK with their low interest rates, it might be a different story.

NZ - that's pretty damn awesome of your niece. Mortgage free in 6 years would be a dream!

You can achieve that dream too. What helped us achieve it in 5.5 years was to up our monthly repayments ASAP. This way it removes the temptation to spend your spare money and your reducing extra principal every month. This also makes it easier to get around the $10,000 minimum for bulk repayment that some banks adhere too.

kiwichick

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Re: New Zealand Investing
« Reply #7 on: December 16, 2012, 03:30:45 PM »
I agree. I'm currently paying $750 a fortnight when the minimum is $500. And now that I have a boarder I'll be increasing that amount.

However I'm single, so no spousal income to help get it any higher (I currently spend $500 per fortnight for all expenses. Everything else goes on the mortgage). I'm currently aiming to have the mortgage paid off in 9 years - hoping for 8 or earlier.

I think when they say sell smartshares when you wish they're talking about selling on the NZX, which would require buyers interested (currently ASB is showing 3 buyers, 1 seller). But you're right, I should contact them to find out for sure.

Edit: just sent an email to find out their cash-out options :-)
« Last Edit: December 16, 2012, 03:38:56 PM by kiwichick »

kiwichick

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Re: New Zealand Investing
« Reply #8 on: December 16, 2012, 04:37:23 PM »
Just had the response from Smartshares:

"Thanks for your interest. To withdraw from smartshares, you have to go through a broker to do that. Unfortunately, there is no option for regular withdrawals."

That's a shame.

marz1982

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Re: New Zealand Investing
« Reply #9 on: December 29, 2012, 03:09:14 AM »
Hello fellow Kiwis!

I've signed up to a broker for my investing - it's just how I've always rolled.  We recently moved to New Zealand so I had to investigate everything from scratch, and we still have some money we need to bring over sometime....

We looked at DirectBroking, but they charge a monthly fee based on your entire portolio, which I think sucks, but maybe they have a good service - http://www.directbroking.co.nz.

In the end we decided to go with ASB Securities - https://www.asbsecurities.co.nz/, since they only charge a trading fee.

Through them, I've purchased NZ index Smartshares FONZ, the iShares ASX 200 index, and more recently discovered the Vanguard ETFs that's available through the ASX.  You could also buy any US or UK stock if you wanted to.  NZ and some Australian stock can be traded online, others requires a phone call.

By they way, purchasing Australian shares with a broker is as easy as a phone call and then your options expand a lot, Vanguard ETFs are 0.06% for US (yes, you read that right...), 0.15% for Australia index - https://www.vanguardinvestments.com.au/retail/ret/investments/etfdetailVASIFE.jsp

And I checked - Vanguard Australia supports New Zealand as well.  Just ask for the stock code in the website above, on the ASX.

So far we've been very happy with ASB - their service over the phone is perfect, and I had no hassles purchasing shares.  Their website needs some improvement though - looking for certain shares for quotes (Like Vanguard) is non-existent for some reason.  Certain pages "logs you out" of the system, which means I log back in about 5 times with every session.... But it's usable for the basics, I just use other websites for quotes/tracking.

We also have a cash stash in ANZ's Serious Saver - it's a money market investment account that guarantees 4.5% interest, as long as you pay in something monthly (Can be as low as $100), and don't withdraw any money (In which case it switches to 1.5% for the month).  If that rate ever goes down, we'll switch to long term fixed deposit/bonds. ** Values are from memory and might be slightly less/more :P

I would say the best advise for New Zealand investing, is to diversify into Australia and also overseas.  I've noticed the New Zealand top 50 is very property heavy, and if that ever tanks over here I can see the stock market taking a dive.  On the upside, great dividends!


Gooki - Yes, Smartshares fees is horrendous.  I cried.... Too bad there's no Vanguard New Zealand index...


gooki

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Re: New Zealand Investing
« Reply #10 on: December 29, 2012, 02:15:12 PM »
Thanks marz. I was about to open a directbroking account based on their lower trade fees. But with them creaming another 0.25% per annum of the top I'll pass.

One gets the impression share market investors in NZ are getting nickled and dimed, for very little service. No wonder so many people invest in property.
« Last Edit: December 29, 2012, 02:20:20 PM by gooki »

kiwichick

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Re: New Zealand Investing
« Reply #11 on: December 29, 2012, 02:22:43 PM »
One gets the impression share market investors in NZ are getting nickled and dimed, for very little service.

Yep, won't change until there's higher interest in share investing and NZers move away from 100% property.

Sounds like there are more options when you deal directly through an ASB broker rather than DIY online. Marz, have you actually invested in the Vanguard funds yet or are you still researching/saving? Would be interested to hear how you get on and your experiences when you wish to sell.

marz1982

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Re: New Zealand Investing
« Reply #12 on: December 29, 2012, 11:15:03 PM »
Yep, won't change until there's higher interest in share investing and NZers move away from 100% property.

Sounds like there are more options when you deal directly through an ASB broker rather than DIY online. Marz, have you actually invested in the Vanguard funds yet or are you still researching/saving? Would be interested to hear how you get on and your experiences when you wish to sell.

Have invested in Vanguard US - the ETF not the fund -  (code VTS on the ASX), not a huge amount but since it's an ETF you can buy as much as you want, with the only downside being broker fees.  We're planning on saving up and purchasing every few months.  The ETF by the way doesn't have any minimum amounts. 

The only hitch so far that I've seen, is that Vanguard doesn't pay out using cheques, so I'm going to phone my broker this week and find out  exactly how I'm going to get the dividends paid out!  The only other alternative to a cheque is direct credit to an Australian bank account...  So I'll let you know how that pans out!  Unfortunately no dividend re-investment plan on this one. 

marz1982

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Re: New Zealand Investing
« Reply #13 on: December 29, 2012, 11:19:07 PM »
Thanks marz. I was about to open a directbroking account based on their lower trade fees. But with them creaming another 0.25% per annum of the top I'll pass.

One gets the impression share market investors in NZ are getting nickled and dimed, for very little service. No wonder so many people invest in property.

Glad to have helped :) 

kineli

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Re: New Zealand Investing
« Reply #14 on: December 30, 2012, 11:41:14 PM »
Just saying g'day from another kiwi - yes being mortgage free is a great first investment goal.

marz1982

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Re: New Zealand Investing
« Reply #15 on: December 31, 2012, 02:06:19 AM »
Must say, I'm quite envious of you guys with your mortgage free homes :D  Rent is just ridiculously expensive compared to where we came from. 

We used to live 5 minutes away from work, in a gorgeous little 2 bed garden cottage that cost us less than 14% of our combined salary (and that was basically starter salaries in IT, so not a lot).  I miss being so close to work!!  It was the equivalent of NZ$180 a week, for a really good quality small house.  Now we're paying $415 a week, for a 30 min commute ouch!  We're limited by needing a cat-friendly rental, and the DH is more picky than me about houses! 

So not sure about the future - if we'll eventually use some investments for a big deposit on a mortgage, or continue renting.  Any advise about owning houses vs renting in New Zealand?

kiwichick

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Re: New Zealand Investing
« Reply #16 on: December 31, 2012, 01:38:34 PM »
Depends on where you live whether buying is better than renting. Personally, I wouldn't even think about buying in Auckland - house prices there are insane. Wellington seems high as well. Even Christchurch is now getting ridiculous.

Though of course, being a Mustachian, you wouldn't fall into the trap of most first-time home buyers and think an average salary = an average home. You have to start at the bottom of the housing market and work your way up.

I agree that it's difficult finding a rental nowadays that accepts pets. The decision to buy a home isn't usually purely a financial one. If I were you, I would run the numbers. Work out what buying a home would cost in your area vs continuing to rent - don't forget to factor in rates, insurance, maintenance etc. It could possibly work out cheaper to buy than rent (it did for me), but that's not often the case.

Jannie

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Re: New Zealand Investing
« Reply #17 on: January 03, 2013, 03:24:40 AM »
Thanks marz. I was about to open a directbroking account based on their lower trade fees. But with them creaming another 0.25% per annum of the top I'll pass.

One gets the impression share market investors in NZ are getting nickled and dimed, for very little service. No wonder so many people invest in property.

I have had a directbroking account for some time. I have only used it a few times.  Thanks for alerting me to the possible per annum charge.  I was not aware of it and will have to check into it.

timbledum

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Re: New Zealand Investing
« Reply #18 on: February 08, 2013, 09:31:40 PM »
Re: local shares (inc. smartshares) and overseas shares; how much are imputation credits an issue for you? I've pretty much discounted buying shares from Auz etc. just because I don't like the idea of tax with my dividends.

naki

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Re: New Zealand Investing
« Reply #19 on: March 03, 2013, 01:39:43 AM »
The only hitch so far that I've seen, is that Vanguard doesn't pay out using cheques, so I'm going to phone my broker this week and find out  exactly how I'm going to get the dividends paid out!  The only other alternative to a cheque is direct credit to an Australian bank account...  So I'll let you know how that pans out!  Unfortunately no dividend re-investment plan on this one.

What was the result on getting Vanguard payouts? Looking for places to invest - the NZ sharemarket seems pretty overvalued at the moment...

mark_nz

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Re: New Zealand Investing
« Reply #20 on: March 08, 2013, 07:21:34 PM »
Hi,

I'm a Brit who has settled permanently in NZ and has been here over 6 years now. The lack of investment options in this country is one of the few things that really annoys me about NZ - the rest is great!

At present, I put about 80% of my savings into my mortgage, and the remaining 20% into Smartshares (in turn split 50/50 between NZ and AU Smartshares). For me, this seems like a sensible way to get a decent share of both worlds (i.e the guaranteed return from debt repayment plus the expectation of a higher overall return from equities).

The high fees on Smartshares do really annoy me, but at least I'm using the regular investment programme directly from the NZX, so there's no fees involved in buying. Selling is just a broker fee, but I haven't had to sell anything yet (and have no intention to).

I am very tempted by the Vanguard ETFs on the ASX. The big thing to remember here though is this country's insane tax rules for FIF (i.e. non NZ or AU) investments. Basically, you will pay tax on up to 5% of your investment every year - effectively a wealth tax. For a highest rate tax payer, that's almost 2% every year. If the overseas investments return last than 5% on paper (so that's dividends plus notional gains), you pay tax on that. If your investments make a loss on paper, you pay no tax but get no credit. This seems to me to be essentially punitive for investing overseas. I would have no problem with a genuine CGT based on actual gains (assuming it's well implemented - the UK's system seems very sensible), but taxing paper gains with no relief for losses seems completely unjust.

I'd be interested to hear dissenting views, but to me this means that there is no good option for index tracking as an NZ resident. NZ trackers are expensive and track a tiny market, but at least are relatively lightly taxed. AU trackers are potentially a bit cheaper, are also lightly taxed (relatively) and track a much bigger market, but the AU market is mining and banking dominated so doesn't seem like good diversification. Foreign trackers such as the Vanguard options on the ASX are much cheaper (0.06% as mentioned before for the US tracker), but are heavily taxed.

Even worse, most accountants don't seem to understand the FIF rules, which are incredibly complex and poorly defined. I've had two accountants in the last few years, and not once have they got my investment taxation calculations right first time. So the compliance cost is high.

I'm a just a few years away from being mortgage free, all going well, so I'm fairly happy putting a relatively small amount into Smartshares for now so that I have some equity exposure. I'm hoping that in those next few years the investment landscape here will change and there will be some decent options available for the cash that previously was going into the mortgage.

Keen to hear other opinions on this...

cheers
Mark

mark_nz

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Re: New Zealand Investing
« Reply #21 on: March 08, 2013, 07:25:37 PM »
And from their [Smartshares'] website it seems they only cash out large sums directly - $200,000 parcels from memory but I can't seem to find that info now.

That's a technical thing for how Smartshares are created / destroyed - it's the mechanism that all ETFs use to keep the ETF price in line with the underlying asset via arbitrage. It has no relevance to retail customers like you or me.

If you buy 20 shares in one of the Smartshares ETFs, you can just sell those 20 shares via a broker like any other listed stock.

cheers
Mark

mark_nz

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Re: New Zealand Investing
« Reply #22 on: March 08, 2013, 07:31:01 PM »
We looked at DirectBroking, but they charge a monthly fee based on your entire portolio, which I think sucks, but maybe they have a good service - http://www.directbroking.co.nz.

I'm pretty sure that's not the case for NZX/ASX listed shares. The custodial fees that I think you're talking about are for when you buy US/UK shares through them and use their custodial services to manage that shareholding. That won't be the case if you're just buying Telecom or BHP or whatever shares.

That's not to say that Direct Broking's rates are particularly good - while they and ASB seem to be the only games in town for "cheap" broking, they're vastly higher that I'm used to from the UK! (Not a customer of either, yet, but I will sign up with one or the other in due course.)

Please correct me if I'm wrong or if I've misunderstood what you're saying.

cheers
Mark

gooki

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Re: New Zealand Investing
« Reply #23 on: March 08, 2013, 11:43:20 PM »
From here.
http://www.directbroking.co.nz/directtrade/static/ourrates.aspx


Custodial Administration Fees

Custody fees, charged on aggregate holdings.
Value calculated daily and charged following the end of each month   0.25% per annum
(total holding)

Fee Minimum
A minimum administration fee of NZ$5.00 is charged each calendar month on aggregate holdings.   NZ$5.00 per month

mark_nz

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Re: New Zealand Investing
« Reply #24 on: March 08, 2013, 11:51:58 PM »
Exactly, that's the fee for using the custody service. But if you hold NZX or ASX holdings only, you're not using the custody service. The custody service is for markets such as London or New York.

Or am I missing something?

gooki

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Re: New Zealand Investing
« Reply #25 on: March 11, 2013, 03:07:48 AM »
You may well be right. Hmm I should contact them and confirm.

gooki

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Re: New Zealand Investing
« Reply #26 on: March 12, 2013, 03:02:29 AM »
So directbroking has no custodial fees for holding NZ or AUS shares. My bad.

Their email response.
"No, there are no annual/monthly fees for holding NZ or AUS shares."

marz1982

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Re: New Zealand Investing
« Reply #27 on: April 22, 2013, 02:46:54 AM »
I'm a Brit who has settled permanently in NZ and has been here over 6 years now. The lack of investment options in this country is one of the few things that really annoys me about NZ - the rest is great!

Hi Mark,

I wish I had met you last year when I arrived in New Zealand, and spent several nights re-reading the NZ tax laws regarding FIF!  I think I'm only now starting to understand how they work!

I was the one who started the mistake regarding DirectBroking's custodial fees - since I was used to this setup from my previous country, when I saw that I just thought "oh dear, not again...".  Woops! 

I can now heartily recommend DirectBroking!  Trading fee is NZ$29.90 for New Zealand shares for up to $15k and 0.2% for anything above that, and AU$29 for AUS shares up to $30k.

Compare to ASB Securities : 0.3% with a minimum of NZ$30.00 per trade, that's $45 for $15k shares, $30 for $10k.

So if you're regularly investing between $10k and $15k, Direct Broking is better, under that and they're pretty much the same.

So you recommend the NZX regular investment program?  We are regularly investing, but hitting the broker fee is basically wiping out dividend "payouts" at the moment (We are signed up for DRIP though).

I also despair at the high Smartshares fees - crazy high compared to Vanguard! 

We've invested in some Aus Vanguard and US Vanguard ETFs, via the ASX market, and encountered yet another problem - to have dividends paid out, you need an Aus bank account.  The US Vanguard ETF doesn't have DRIP options, not sure about the Aus index.  IShares sends a cheque - fantastic, except that to bank that Australian cheque can cost up to $15!  Together with FIF it's a lose-lose proposition.

We're in our 4 years of FIF exemption - http://www.ird.govt.nz/yoursituation-nonres/move-nz/temp-tax-empt-foreign-inc.html, so fortunately don't need to worry about FIF right now, but I cringe thinking about paying that much tax.
Apparently it's because the government came up with some kooky theory about all those "darn US stocks" not paying out dividends and instead growing in value, means it's some kind of tax haven for New Zealanders.  Give me capital gains tax any day!  At least I don't keep paying and paying for it every year.

The worst is not getting any credit if your investment drops in one year, and then gains in the next.  Even if you haven't made up what you've lost in the down years, you still pay tax!

Thanks for your comments :)

marz1982

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Re: New Zealand Investing
« Reply #28 on: April 22, 2013, 03:17:09 AM »
I'd be interested to hear dissenting views, but to me this means that there is no good option for index tracking as an NZ resident. NZ trackers are expensive and track a tiny market, but at least are relatively lightly taxed. AU trackers are potentially a bit cheaper, are also lightly taxed (relatively) and track a much bigger market, but the AU market is mining and banking dominated so doesn't seem like good diversification. Foreign trackers such as the Vanguard options on the ASX are much cheaper (0.06% as mentioned before for the US tracker), but are heavily taxed.

Thought I'd comment on Smartshares separately.  What do you think about the index tracking error on the NZ shares?
I've noticed in FONZ (TENZ doesn't have an index to compare to on Bloomberg unfortunately), which would normally be my go-to option, that the tracking is really bad.  I don't know if it's due to the capping of weight of individual companies, and the big 10 doing really well, that is skewing the return, but it concerns me.  I just looked at the history for all top 10 companies, and other than one or two that has increased by 1% since 2009, I can't account for the ETF being in negative territory since 2009, and the index being at 22% total growth....

To work this out, this is what I did (Maybe I did something wrong here.  EDIT - I did, comparing apples to oranges!  See note below) :

1) go to the Bloomberg website for the NZ 50 index :

http://www.bloomberg.com/quote/NZSE50FG:IND/chart

2) Add to the chart, the stock option "FNZ:NZ"- it's the textbox just under the "Overlay" link.

3) Change length of time to 5 years

4) Subtract starting price of each from the final price, divided by the starting price, to get total % growth, and compare - the NZ 50 index has far outperformed the ETF that should be tracking it.  Index is around 21%, ETF is around -3%  Of course this doesn't include dividend payouts, but I'd expect the capital growth to follow better than that.

Possibly the Smartshares ETF is underpriced at the moment for some reason - small pool of investors driving prices down and not being savvy enough to realise the worth of the shares?  Bargain shares paying out excellent dividend yields?

Your comments/thoughts would be very welcome, I am very new to New Zealand investing options :)

EDIT : Answered my own question :)  Looked through some of the annual reports from SmartShares, and in the 2010 report they explained that (after making some changes to how dividends are being paid out) they don't follow the *gross* 50 index, as that assumes dividends are re-invested.  I'm comparing to the wrong index, and unfortunately looks like most websites display the gross index, so don't think I'll be able to compare properly.
« Last Edit: April 22, 2013, 03:15:39 PM by marz1982 »

mark_nz

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Re: New Zealand Investing
« Reply #29 on: May 17, 2013, 10:05:51 PM »
Hi,

You want the NZ50 Capital index, not the gross index. That's NZ50C.

This graph is interesting - it compares the gross index, the capital index, and FNZ.

http://www.google.co.uk/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1368849625974&chddm=508343&chls=IntervalBasedLine&cmpto=NZE:FNZ;NZE:NZ50G&cmptdms=0;0&q=NZE:NZ50C&ntsp=0&ei=0PyWUZDLAYjdiQLTuAE

No surprise that the gross index is comfortably ahead, as it of course includes dividends. It's the closeness of the capital index and FNZ that's more interesting. There is a reasonable amount of tracking error in there, although it seems that FNZ is generally a little ahead of its index (which I guess is the better option of the two!) That depends on your start date though, of course.

cheers
Mark

PS - anyone buy any Mighty River? I dipped in for a few k.

mark_nz

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Re: New Zealand Investing
« Reply #30 on: May 17, 2013, 10:18:31 PM »
So you recommend the NZX regular investment program?  We are regularly investing, but hitting the broker fee is basically wiping out dividend "payouts" at the moment (We are signed up for DRIP though).

The plan works nicely for me. If you're regularly investing into Smartshares, it makes far more sense than taking the $30 hit every time. They re-invest the dividends for you too, if you so desire.

They take the money on the 20th of the month and only invest around the 10th, which works in their favour a bit. That could cost you more than $30 if the amount you're investing every month is over a certain value, but a quick calculation suggests to me that you'd need to be investing over $10k a month for that to become anything close to being an issue.

That's very interesting about dividends from the ASX ETFs! Are you buying them through Direct Broking? I'm surprised they don't have a solution to that problem for you.

I'm about to open an account with Direct Broking. Clicked the "send me the forms" button on their website yesterday, and an envelope arrived today. Pleasingly efficient.


the lorax

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Re: New Zealand Investing
« Reply #31 on: May 18, 2013, 07:47:50 PM »
Hi
I was really pleased to spot this thread as I've been trying to figure out whether it is possible to invest in the Vanguard-type funds from NZ after reading about them in the blog posts. I'd also discovered that it's possible to buy ETFs that are listed on the ASX directly through my ASB share trading account. The ASB online broking service seems reasonable although I find the share info often doesn't include dividend yield and P/E type information.

Some questions - if anyone can help with any of these I'd really appreciate it!

I thought that the FIF rules were that dividends are taxed at your marginal tax rate. Gains on portfolios of less than $50,000 aren't subject to the FIF 5% tax - is this right?

For Australian ETF shares do you get imputation credits that mean  you pay less tax in NZ or do you get taxed twice still?

For a US share ETF for example- do the dividends get taxed at source and then do you need to calculate your own NZ tax at the end of the tax year (I'm just starting out in investing and so we're talking small sums and therefore not worth using a tax accountant!).

I think iShares have a reinvestment option for Australian shares. Do any of the European/US ETFs on the ASX have an option for DRIP?
Did anyone figure a way to overcome the dividend payout issue from the likes of iShares/Vanguard?

Thanks

mark_nz

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Re: New Zealand Investing
« Reply #32 on: May 19, 2013, 12:27:58 AM »
FIF rules are that you pay tax on 5% of your entire portfolio. How much you actually receive in dividends is irrelevant. Basically, they just behave as if you received dividends of 5%, whatever the outcome (hence Fair Dividend Rate). Like you say, portfolios under $50k are exempt. So if you have $60k invested at the start of the year, and it goes up to $70k, you'll pay tax on $3,500 (at whatever your marginal rate is).

However, if your portfolio goes up by less than 5%, you can instead elect to pay tax on the actual gain (including dividends). So say your $60k investment only goes up to $61k, and you receive another $1,000 in dividends, you'll pay tax on that $2,000.

If your portfolio goes down, then you don't pay any tax, but you also can't deduct the loss, or carry it forward. So if your $60k at the start of year 1 goes down to $50k over a year, and then back up to $60k the following year, you'll pay tax on that $10,000 "gain", even though you've gone nowhere. To me, that's the most unfair thing about this. But the flipside is that in years when you the value goes up by more than 5%, the amount of tax is capped.

For anything you buy and/or sell during the year, you likewise get taxed on 5% of that amount. I'm a bit hazy on the exact calculation for this, but it should be easy enough to look up.

Re imputation credits from Australian shares, I'm pretty sure that you can't claim that tax at all in NZ. So yes, you get taxed twice there. I'm pretty sure that the same applies to US shares. Whatever dollar amount you receive is the dollar amount that counts for tax.

I'm going to drop Direct Broking an email to ask about dividends from Australian shares. I'll post the response here.

EDIT: just for the record, all of the above is my general understanding, and it without doubt incomplete and flawed in some way. Don't rely on it in any way. It's just this amateur's general understanding of the fiendishly difficult FIF rules. My accountant does the hard work for me in real life...
« Last Edit: May 19, 2013, 02:55:29 PM by mark_nz »

the lorax

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Re: New Zealand Investing
« Reply #33 on: May 19, 2013, 01:04:21 AM »
Hi
thanks very much for your response, that's really helpful and it would be great to hear how you get on with the dividend payouts!

MichaelR

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Re: New Zealand Investing
« Reply #34 on: May 19, 2013, 12:09:53 PM »
As an investment newbie I have been learning about the various fees charged for managing investments. In particular if you go through a financial advisor there are the management fund fees, the advisor fees and the custodial fees. With Bradley Nuttall, who seem to be among the cheaper of these advisors in NZ, the total is around 1.2% of the portfolio per year.

This seems expensive but I know next to nothing about investment or the stock market and wonder if I should be using an advisor.

As has been pointed out on this thread there is no straightforward Vanguard like option here.

mark_nz

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Re: New Zealand Investing
« Reply #35 on: May 19, 2013, 02:53:43 PM »
I found this on Direct Broking's website, about the Online Multi Currency Account:

https://www.directbroking.co.nz/DirectTrade/static/OMCAFaqs.aspx

Quote
Can I pay my AU, US or UK dividends to the OMCA?

Australian dividends paid to you by Australian Dollar cheque can be posted to Direct Broking and deposited into your OMCA AUD account. Please note that an 8 day clearance period applies for Australian Dollar cheques. The OMCA cannot accept Australian Dollar direct credit payments for Australian dividends.

So, it's really not looking good for ASX shares.

nktokyo

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Re: New Zealand Investing
« Reply #36 on: May 20, 2013, 09:06:30 PM »
With the high dollar why keep your currency in NZ?

Mr Mark

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Re: New Zealand Investing
« Reply #37 on: May 22, 2013, 11:11:17 AM »
Wow! Thanks for starting this thread. As a long time expat kiwi, this new foreign tax is interesting!

It seems directed at all the recent influx of immigrants, and to stop offshore tax avoidance. Very complicated. The flow chart they show is absolutely classic!

I can understand their logic. They say, look, you've got lots of money offshore. Cool. You must be getting a return. Must. So we'll assume 5%,  and tax you on that. If it's a loss, tell us, and there's no tax. If it's more than a 5 % return, well done and we won't tax that.

It's really quite generous, when you think about it, but if you are not used to being taxed on unrealised capital gains, it hurts, I agree. And it looks like you need an accountant to ensure compliance and minimize exposure. (With lots of money wrt FIRE stashes, is it better to form a company?)

And it stops the whole offshore tax avoidance thing, relatively simply, I hope. Ie So those 1% kiwi mitt Romney types at least pay something? If so, then fair enough, I say.

Mr Mark

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Re: New Zealand Investing
« Reply #38 on: May 22, 2013, 02:20:13 PM »
Check out the loophole for if you own an active company outside nz or Aussie, a CFC or controlled foreign company. Dividend income from an overseas company is ... wait for it... tax free in nz for a nz resident taxpayer!

http://www.ird.govt.nz/toii/cfc/how-cfc-taxed.html

Wow.

nktokyo

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Re: New Zealand Investing
« Reply #39 on: May 22, 2013, 05:47:51 PM »
A lot of countries do that to attract currency. Singapore and Hong Kong are the same AFAIK

Mr Mark

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Re: New Zealand Investing
« Reply #40 on: May 22, 2013, 07:17:15 PM »
That's pretty attractive for some high net worth American s I'd say!  Become a new Zealander, establish tax residency, and no Cayman island problem. More honest than Apple! :D

Edit. Forgot to remind everyone of the free health care and general civilisation Colorado-esque lifestyle.
« Last Edit: May 22, 2013, 07:19:03 PM by Mr Mark »

NZBubble

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Re: New Zealand Investing
« Reply #41 on: July 31, 2015, 09:23:41 PM »
Very good news for NZers interested in ETFs not based on NZ or AUS.

http://smartshares.co.nz/types-of-funds

Some Vanguard funds available through Smartshares and also through ASB Securities.
Note that around NZD66 + per share they are not cheap.

kiwichick

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Re: New Zealand Investing
« Reply #42 on: August 02, 2015, 07:49:32 PM »
Jumped in straight away. Though only with the minimum investment right now and $50 monthly. Plan to ramp this up next year. Stoked that we finally have decent US/World ETF options with the ability to drip-feed it.

Shame the fees are high (0.3-0.45% ON TOP of the Vanguard fee!).

NZBubble

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Re: New Zealand Investing
« Reply #43 on: August 04, 2015, 01:57:16 AM »
I printed off my application forms today, thanks to your heads up on the other thread.

Painful having to go and get certified ID documents though :/

I've selected large U.S. and global funds. $100 a month. ANZ Investment fund fees are 1.5%, I'm fingers crossed that the Vanguard fees plus the 0.4% will still be less than 1.5.
Feels like a bit of a risk with no NZ fund history or returns to view. But how can all these MMM people be wrong lol?

Also steeled myself and bought more shares with my cash EF, and completed a low fee credit card application to function as my EF. Recently my low limit day to day card was useless and I ended up taking $7k in cash out for a family member. So I decided one with a big limit would be useful, and then I could also put my cash to work.

zb3

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Re: New Zealand Investing
« Reply #44 on: August 04, 2015, 02:36:03 AM »
Seems like a waste to use smartshares for vanguard etfs unless they are hedged ( didn't appear to be on my quick reading).  I'm from nz and use interactive brokers to invest in vanguard etfs directly.  That way I only have to pay the vanguard fee of 0.05 percent

NZBubble

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Re: New Zealand Investing
« Reply #45 on: August 04, 2015, 03:58:20 AM »
Please share how, and the cost.

I haven't sent my application in yet....

I am just selling AMP hedged global funds, they have gained about 4% while at the same time the unhedged fund is around 22%. So, not keen on the returns of hedged funds in my (extremely limited) experience.

zb3

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Re: New Zealand Investing
« Reply #46 on: August 04, 2015, 04:31:16 AM »
Apply online there are a few forms to bill out etc but it's not too bad.  IB have an account with Citibank in Auckland so it costs nothing to xfer money to them.  Commission is around 2 dollars to convert currency and buy an etf - it's very cheap nothing like the few hundred you'd end up paying from asb to convert currency and buy a us etf.  IB charges a flat fee for currency conversion and passes on the exchange rates it gets to it's customers so there's no crazy 3 percent spread.  There's a monthly activity fee of 10 a month if u don't trade at least 10 dollars worth.  This is waived for accounts with over 100k and is cheaper for those under 25.  Best thing about IB is the margin rates (like 1.5%) or less depending on amount borrowed (less than one percent for large amounts).  Also once u have over 100k you can get a portfolio margin account which has far less maintenance margin reqs than reg t margin - so risk of margin call is far less.  You can also leverage far beyond x2 if that's what you're in to.

In regards to currency fluctuations, I think the should broadly even out over time if you are a regular contributor.  Although I must say I've made heaps recently when the nzd dropped lots against the usd.

NZBubble

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Re: New Zealand Investing
« Reply #47 on: August 04, 2015, 12:36:53 PM »
Thanks zb3 :0)

Just one question..... IB is what? International brokerage?

So; open a bank account with Citibank in Auckland, open an 'IB' account - wait- is this like opening an ASB account to use ASB Securities to buy shares? 

Thanks for the info on margin calls. I'm old (not obsolete) so won't be risking that. Well, until I get more informed anyway. And probably not even then :0).

kiwichick

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Re: New Zealand Investing
« Reply #48 on: August 04, 2015, 12:38:21 PM »
I don't see the appeal of currency hedging for the long term, only for short term investments where you can't afford a large movement in the exchange rate devaluing your investment (in which case, shares aren't a good option anyway). I read somewhere recently that hedged funds have performed poorly over the long term compared to unhedged funds, but I can't recall where now.

zb3

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Re: New Zealand Investing
« Reply #49 on: August 04, 2015, 02:15:40 PM »
@ nzbubble IB=interactive brokers.  You just open an account with them just like signing up to asb just a few more forms because it's based in America.  You don't need to open an account with Citibank Auckland don't even think you could it's only for big players.  All I'm saying is that because ib have an account wht them when you xfer them money it's considered to be a domestic xfer and therefore no fees.

@kiwichick I agree over the long term hedging is unlikely to do much provided you controvute regularly