Smartshares and exchange-traded funds

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Forums › Finance and wealth management › Smartshares and exchange-traded funds - thoughts and advice?

jonathan18

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#162084 28-Jan-2015 16:32

Hey there,

My wife and I are considering putting a small amount of money into one of the Smartshares' exchange-traded funds (http://www.smartshares.co.nz/) as part of an attempt to diversify our savings. Some of the advantages of these funds we have noted include the simplicity of the idea, the relatively low buy-in (minimum of $500 up front and a$50 montly contribution) and the spread risk (across a number of companies) that wouldn't be possible otherwise with such a low investment.

We are still 25sh years away from retirement, so see this as a long-term investment. We are also after something relatively simple to manage - I just don't have the time or inclination to spend trying to master the intricacies of the sharemarket. I did contemplate the idea of the property investment funds discussed recently here on GZ, but I feel it more suitable for us to spread this investment more widely than just property.

We are essentially sharemarket virgins, so we are approaching this with some trepidation! Can anyone offer advice as to the suitability of EFTs generally (and Smartshares' funds in particular)? There's not a huge amount on ETFs in NZ (given the limited number available and their lack of significant take-up), and while I understand the fees on these funds is high compared to some others internationally, how do they stack up against the costs associated with other investments, such as directly trading in shares?

We have a preference to invest in NZ companies, which means the possible funds are the top 10 (FNZ), top 50 (TNZ) or medium-sized businesses (MNZ) -how do we select one of these over the other, given our we limited at this stage to selecting one only?

Apologies for the long post, and many thanks for any advice members can offer.

Cheers
Jonathan

nickb800

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#1224225 28-Jan-2015 16:54

I've been looking at this myself. Just to throw another idea out there (even though you are interested in NZ stocks) there is much more choice of ETFs on the ASX (which can easily be traded on through NZ brokers like ASB securities online). Vanguard is a mutual organisations (owned by its members...just like AMI was) that runs ETFs internationally including on ASX. Because of their scale and mutual-ness their annual management fees are much lower, generally more than half of the smartshares equivalent. The upside with smartshares is no fee to buy or sell directly with them (AFAIK) whereas with an ASX traded ETF like Vanguard will have brokerage fees to buy and sell (0.3% with ASB securities online). If you will be in for the long haul, then the reduced annual fee with will make up for the cost of entry and exit though

afe66

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#1224232 28-Jan-2015 17:11

Ive been investing in the FONZ and MOZY smart shared which are the top 50 NZ and middle Au stocks for a while. FONZ for probably 10 years the Mozy for less.

The plus side of passive shares is the "low" management fees and the safety of spreading the risk over many companies.

Yeilds have been ok 4-5% for the nz shares rather than spectacular, similar to term deposits some years. (less so for the Mozy)

I look at it as a conservative, saving plan with a couple of hundred a month which get put away and all dividends reinvested and ignored. ie they are just part of long term investing rather than aiming for something specific like house deposits or childrens university.

My passive default kiwisaver plans were returning 7% over the same time period though... and the aggressive ones were 13%.

If I was starting today I would also look at other companies offering passive index funds for UK or US markets as we are very small and I worry slightly that our economy might be a little tempremental so some cash overseas appeals.

Mind you I'm thinking about gambling with some higher risk ones too.

Look at the yields and compare them with the very safe term deposits rates....

A.

jonathan18

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#1225165 30-Jan-2015 10:08

Thanks for the feedback, guys - useful information.

Given we are increasingly keen on building a house sometime in the mid-to-distant future, can you offer advice as to whether dabbling with shares (via ETFs) is even a sensible thing, or whether we are just best to put that money into our current mortgage (for a currently guaranteed 5-6% 'return'), therefore lock this money in towards the house build? We're likely to be stretched financially when we do get to the point of building, so will no doubt need to get hold any easily realisable asset, so it may well be that any share investment ends up being cut short (say five-ten years' time).

Thanks!

nickb800

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#1225168 30-Jan-2015 10:13

If that's the case, then personally I'd keep a few $10,000 in the bank as a rainy day fund and put anything left over on the mortgage. The market may return more than your mortgage interest rate, but a risk-free 5-6% effective return on investment is pretty hard to beat