How should I "invest" my savings?

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Forums › Finance and wealth management › How should I "invest" my savings?

AidanS

458 posts

Ultimate Geek

#130877 1-Oct-2013 13:37

Hi guys,

Thought I'd ask here to see what you guys think. With 2013 coming to a near close I figured I would consider my options as to how I should invest my savings.

My opening Balance for December will be $8000, with $300-$400/month deposits. I currently have my money in Bonus Bonds "just for fun" but am considering RaboDirect's premium saver account (4.20%).

Note: I'm <18 and would like low risk options :). I most likely won't need to touch the money until I'm in my early 20's when I'll be needing to buy a house, so am also considering term deposits.

Thoughts?

Thanks,
Aidan.

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20574 posts

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#905721 1-Oct-2013 13:49

If you want low risk then term deposits are probably best. If you're willing to risk a little more and you've got at least 5 years then consider a balanced risk managed fund, Fisher Funds for example did a good job for me. I got in at the start of a period of growth, increased my savings by 75% in 2-3 years, then got out. Of course you can lose everything if you invest, so never invest more than you can afford to lose.

minimoke

750 posts

Ultimate Geek

#905724 1-Oct-2013 13:53

Have you thought of the share market. You are young enough to cope with risk - or certainly old enough to start learning about risk and managing it.

The New Zealand exchange has a few companies that offer reasonable dividend yields and other companies offer capital growth – either way you ought to be able to find something that is worth more later on than just sticking it in the bank.

The lessons you will learn form a share investment will be way more valuable than any interest you make in some poxy fixed term deposit.

mattwnz

20141 posts

Uber Geek

#905725 1-Oct-2013 13:53

Forget bonus bonds, even for fun (which they aren't), you are better buying a lotto ticket once a month and getting interest from the savings.
IANAFA, but in the US, they suggest dividing your savings into 3. 1/3 in cash in a high interest account, 1/3 in equities/shares, and a 1/3 in property. Property in NZ is historically seen as a good place to put your money, and it is possibly too big to fail, due to so many people having interests in property.
For your amount, you could consider kiwisaver, and you maybe able to withdraw your contributions for buying a house. But I would get some financial advice from an expert.

mattwnz

20141 posts

Uber Geek

#905728 1-Oct-2013 13:54

minimoke: Have you thought of the share market. You are young enough to cope with risk - or certainly old enough to start learning about risk and managing it.

The New Zealand exchange has a few companies that offer reasonable dividend yields and other companies offer capital growth – either way you ought to be able to find something that is worth more later on than just sticking it in the bank.

The lessons you will learn form a share investment will be way more valuable than any interest you make in some poxy fixed term deposit.

My issue with shares at the moment is that it is getting a bit high and overvalued, and with what is going on in the US at the moment, we could see another financial problem occurring.

billgates

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#905729 1-Oct-2013 13:56

I hate term deposits with a passion in NZ. 4.20% of your $10k investment will return you $420 after 1 year and that does not includes tax that will be deductible from the $420 you made in 1 year after depositing $10,000. It's the absolute safest bet but you are not going to be richer anytime sooner or ever with it's pace.

Invest in a business/stake, shares etc that make sense. Risky if you do not know what you are doing but the rewards are good.

Do whatever you want to do man.

AidanS

458 posts

Ultimate Geek

#905733 1-Oct-2013 14:04

billgates: I hate term deposits with a passion in NZ. 4.20% of your $10k investment will return you $420 after 1 year and that does not includes tax that will be deductible from the $420 you made in 1 year after depositing $10,000. It's the absolute safest bet but you are not going to be richer anytime sooner or ever with it's pace.

Invest in a business/stake, shares etc that make sense. Risky if you do not know what you are doing but the rewards are good.

That's why I'm leaning away from shares as I would have absolutely no idea where to start as a 16 yr old.

-Aidan.

MikeB4

18435 posts

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#905734 1-Oct-2013 14:04

I would make an appointment with a reputable professional to get advice.

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timmmay

20574 posts

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#905737 1-Oct-2013 14:16

Financial advisers exist to make themselves rich.

Bank accounts really just protect your money against inflation, not much more, but it's probably appropriate for a 16 year old.

hangon

397 posts

Ultimate Geek

#905740 1-Oct-2013 14:24

imho it's important to talk to a financial adviser, it would be a valuable lesson for many years to come.

it may start with a risk assessment, being young doesn't always mean you are more suitable for higher risks.

from there the picture maybe clearer what you'd be looking for. I don't think bonus bond would be in that picture whatever risk assessment result you get.

ymmv and history doesn't always repeats itself (or on a longer circle that one just can't comprehend in a life time).

think about your next steps, OE? first home? have kids? plans always change, but think ahead might get you better prepared (i.e. lock into kiwisaver helps buying first home but wont when buying a round world ticket).

Inphinity

2780 posts

Uber Geek

#905742 1-Oct-2013 14:28

KiwiNZ: I would make an appointment with a reputable professional to get advice.

This. And do your research on the adviser. Do find someone reputable, as KiwiNZ suggests. Don't put too much stock in financial advice from someone on the verge of bankruptcy, even if they're 'qualified'. Most so-called financial advisers don't truly understand how to use the vehicles available to them to help you, they just understand how to get the best commission they can.

Now, for my opinion (and, as with others, I am not a financial advisers or in any way a finance-industry professional). If you really want something low-risk, either go with a premium savings account or a term deposit. In either case, $8k starting and $300/month for 5 years is gonna leave you with something nearing $30k at the end of it (about $3500 or so will be interest). Personally, I'd use it as a great opportunity to learn some financial and business acumen, though, and learn about shares, funds and bonds, even with just a quarter of the initial money.

Zeon

3916 posts

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#905744 1-Oct-2013 14:39

Some in shares, some in term deposits, some perhaps in commodities. Maybe some under the bed!

Investing is a risky place and leaving it in the bank can be just as risky too.

Could look at Meridian for the IPO?

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khull

1245 posts

Uber Geek

#905760 1-Oct-2013 15:34

Savings is a great start at any point in time.

For your case I would recommend dividing up your equity based on your appetite for risk. What that proportion is will depend how risk adverse you are. At your age, you should be comfortable taking a couple but it will differ based on who you talk to even in your age group.

Also start with a goal shot, mid and long term in terms of what growth you are expecting. That will help determine the investment approach

E3xtc

773 posts

Ultimate Geek

#905772 1-Oct-2013 15:53

regardless of what you go for I say, good on you for being quite young and so diligent to get a decent pillow of savings under your belt! Well done; that sort of mentality will serve you well going forward.

Anyhow, if you are not too inclined to play in the share market; but like the sort of returns (because as has been mentioned normal bank account/term deposit rates can be down right depressing), why not go and talk to someone like your bank about entering into a managed fund? you can split your investment through whatever types of risk you feel comfortable with:
for example, 2k in high risk, 4 k in moderate, and 2 in low risk...

If you also continue to add to the fund through periodic instalments then as has been mentioned then you still have that savings growth too....just bear in mind however that this sort of thing is played out over a number of years (5 or more at least)....I did this for about 6 years when I was younger, just with my bank and was well happy with the end result.

but again - well done!

adw

175 posts

Master Geek

#905791 1-Oct-2013 16:10

If you don't already have a KiwiSaver account open one (Fischer is doing well), you'll get the incentive payment from government (still $1000 I think) for joining plus each year if you put in $1350 then the government matches that with $650. On top of that you get the growth depending what fund you've gone for. You can then take it out to buy your first home. If you do have a KiwiSaver it depends on what sort of risk you want to deal with. http://www.piefunds.co.nz/ have been doing really well but they are high risk, otherwise you could start a rolling term investment situation, e.g. invest 1/4 for 1 year, then 3 months later another 1/4 for 6 months, etc. In this way you'll have access to some on a rolling basis without penalties. Hope that helps.

AidanS

458 posts

Ultimate Geek

#905797 1-Oct-2013 16:18

adw: If you don't already have a KiwiSaver account open one (Fischer is doing well), you'll get the incentive payment from government (still $1000 I think) for joining plus each year if you put in $1350 then the government matches that with $650. On top of that you get the growth depending what fund you've gone for. You can then take it out to buy your first home. If you do have a KiwiSaver it depends on what sort of risk you want to deal with. http://www.piefunds.co.nz/ have been doing really well but they are high risk, otherwise you could start a rolling term investment situation, e.g. invest 1/4 for 1 year, then 3 months later another 1/4 for 6 months, etc. In this way you'll have access to some on a rolling basis without penalties. Hope that helps.

I already have a KiwiSaver with Tower which was set up when I got my part time job. Thinking of transferring it to somewhere else though.

-Aidan.

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