A DIY guide for would-be investors

by Sophie Boot / 10 October, 2017

Help us find and write the stories Kiwis need to read

RelatedArticlesModule - Investing

Photo/Getty Images

If you are not of a mind to keep it all under the mattress, there are plenty of investment options other than property.

If you believe the hype, shares are unfathomably risky and complicated. Think every movie or TV programme that shows a trader screaming “Buy! Buy! Buy!” into a phone. Even though the reality is somewhat less dramatic, the perception remains.

But a new class of online platforms is emerging, giving mum-and-dad investors, student investors or young professionals with a bit of spare cash more options than ever to invest their money themselves.

International research suggests millennials are more anxious and risk-averse when it comes to share portfolios, which is hardly surprising when many have given up the prospect of ever owning a house and are still battling with weighty student loans.

In June, a report from Macquarie Wealth Management in Australia found young people are attracted to digital-based tech solutions, especially where they can manage their own funds: there are lower minimum investments, smaller fees and user-friendly apps and language, which create a lower barrier to entry for sharemarket beginners.

“Tapping into their distrust of established financial institutions, nimble fintech startups are specifically … using technology to provide better choice, convenience and sustainable options all in a turnkey smartphone-app environment,” the Macquarie report noted, adding that in Australia, young single people have seven times as much money in their bank accounts as in shares, and the richest demographic of couples, aged 55 to 64, had a ratio of less than 3:1.

Many Kiwi millennials have been enrolled in KiwiSaver since starting their first job, and young people are increasingly aware of the returns possible from shares. Some are content to stick with more hands-off options, such as term deposits, but increasing numbers are looking to get stuck in themselves.

Locally, savings and investment provider InvestNow, which launched in March, reports that it has over $75 million being managed by clients using its website. The platform offers products such as the Nikko Asset Management NZ Cash Fund and the AMP Capital NZ Cash Fund, which are typically open to retail clients investing at least $2000.

InvestNow’s Anthony Edmonds.

InvestNow founder Anthony Edmonds says the smaller minimum investment of $250 is popular with investors, and low annual management fees also appeal.

“We get lots of people who initially open an account just to look around InvestNow,” Edmonds said. “They then invest $250 to see how InvestNow works, and after that they will ramp up their investment and start building their portfolio.”

Investors using the platform can access funds run by global fund managers such as Vanguard, as well as a slew of major local fund managers – AMP Capital, Harbour Asset Management and Salt Funds Management, to name a few.

Sharesies, whose invitation-only beta platform launched in June, has even lower barriers: it costs $30 a year to join and users can invest from a minimum of $5 into index funds.

Less than two months after its launch, more than 3500 people have used the platform to invest more than $1 million into NZX shares, though it’s still in development mode: there are plans to add more fund options and performance tracking over time and to move to open beta, where wannabe investors will be able to sign up straight from the website.

The company’s founders say they want to encourage people to become more financially literate and give them the gratification of being able to invest the $20 they might have otherwise spent on brunch.

InvestNow's Mike Heath.

InvestNow general manager Mike Heath says it’s not just young people using the platform: retired chief executives, grandparents wanting to save for their grandchildren’s education and large family trusts are also getting involved.

Recently, he’s noticed that investors who would normally put short-term investments into term deposits are taking an interest in cash funds instead; perhaps no surprise given the Reserve Bank’s latest indications that inflationary pressures are lower than expected, and interest rate raising is some way off.

Crowdfunding is another place for investors looking for alternatives to the sharemarket. Three years after the first platforms were granted licences, the market has consolidated somewhat to see three major players: Snowball Effect, Equitise and PledgeMe. However, crowdfunding is more of a long-term investment with less ability to withdraw money if circumstances change, and no platform is planning to offer a formal secondary market, on which investments could be traded.

Mark Peterson, chief executive of sharemarket operator NZX, says crowdfunding isn’t a threat to conventional investing but rather “has a place in the total ecosystem”.

“We’ve got to work out how we play with crowdfunders – all those commercial decisions,” Peterson says. “People should be aware of the risks and make choices around that risk-return trade-off. I do see linkages between the life cycle of businesses and the raising of capital and potentially the secondary market.”

Ultimately, investors looking for more risk and return than banks can give them face fewer barriers than ever. Houses remain the largest asset most Kiwis own, but the rise of low-barrier alternatives can only be a good thing for those who can’t – or don’t want to – sink their money into bricks and mortar.

This article was first published in the September 2, 2017 issue of the New Zealand Listener.

Latest

Father figure: Jordan Watson on his 'How to Dad' series
93157 2018-07-21 00:00:00Z Social issues

Father figure: Jordan Watson on his 'How to Dad' s…

by North & South

The breakout Youtube star talks about 'How to Dad', paternity leave, and his own dad.

Read more
With friends like Donald Trump, who needs enemies?
93834 2018-07-21 00:00:00Z World

With friends like Donald Trump, who needs enemies?…

by Paul Thomas

The US President treats his Western allies to a tongue-lashing while cosying up to Vladimir Putin, causing alarm at home and around the world.

Read more
Who Is America? is predictably alarming – and scarily relevant
93831 2018-07-21 00:00:00Z Television

Who Is America? is predictably alarming – and scar…

by Diana Wichtel

Only Bernie Sanders comes out unscathed in Sacha Baron Cohen’s absurdist new series Who Is America?

Read more
Organic wine is getting bigger in New Zealand. These are our top picks
93885 2018-07-21 00:00:00Z Wine

Organic wine is getting bigger in New Zealand. The…

by Michael Cooper

Quality rather than quantity drives New Zealand's organic wine producers.

Read more
Killer robots: The question of how to control lethal autonomous weapons
93876 2018-07-20 08:23:45Z Tech

Killer robots: The question of how to control leth…

by Peter Griffin

The computer scientist who has become a leading voice on the threat posed by killer robots describes himself as an “accidental activist”.

Read more
The man who's making sure performing artists are seen in the regions
93813 2018-07-20 00:00:00Z Theatre

The man who's making sure performing artists are s…

by Elisabeth Easther

For 35 years, Steve Thomas has been at the helm of Arts On Tour, taking musical and theatrical acts from Kaitaia to Stewart Island.

Read more
The Eco Economy: Millennials, money and saving sustainably
93645 2018-07-20 00:00:00Z Economy

The Eco Economy: Millennials, money and saving sus…

by Sharon Stephenson

Millenials are leading the rise of the eco economy.

Read more
Cuba Libre is a new Caribbean-influenced restaurant-bar in Ponsonby
93862 2018-07-19 15:05:51Z Auckland Eats

Cuba Libre is a new Caribbean-influenced restauran…

by Kate Richards

Rum, cigars and Cuban sandwiches are on the menu at new Ponsonby restaurant, Cuba Libre.

Read more