Investments - Where to start?

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Forums › Finance and wealth management › Investments - Where to start?

Aaroona

3196 posts

Uber Geek

#173631 30-May-2015 11:53

I'm just wanting to get an idea of where to start investing a bit of money.

I guess I should start with a few questions;

1. How much many is needed to start investing (though, this will depend on what I'm investing in). Obviously there's generally no minimum, but wanting to get a guideline on where is it enough for it to start counting.
2. Where is a good place to start looking at different types of investments? (any websites, or reputable advisers)
3. I see people saying talk to an investment adviser; are there advisers I need to be wary of (or recommended ones!), or things I need to be asking if I did see one?

Obviously things like Forex trading is pretty risky business, even if you have enough time to keep an eye on it, given how volatile most of it is. So probably want to avoid Forex trading for the time being.
I understand there are risks with investments, and for a rule of thumb, more risk means potentially more reward, but also more loss if things go sideways.

My overall target is really to gain more than the interest the bank gives on any of their accounts, which usually maxes out around the 5% mark.

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3885 posts

Uber Geek

#1314579 30-May-2015 12:57

Buy a house in Auckland.

Lazy is such an ugly word, I prefer to call it selective participation

Aaroona

3196 posts

Uber Geek

#1314581 30-May-2015 12:59

scuwp: Buy a house in Auckland.

Should have mentioned - I'm not already a multi-millionaire.

Juicytree

141 posts

Master Geek

#1314584 30-May-2015 13:11

It depends on what you wish to use your investment savings for in the future. If it is for superannuation or funds for your retirement of if you are saving for a house then Kiwisaver would be my preference.
However if you are saving for other reasons then simply purchase a few equities. If you go to an advisor (Forsyth Barr, Craigs Investments) be prepare for him/her to want to manage your investments and clip the ticket on the way. It is possible to get advice on good solid shares, purchase them through that broker but manage it youself using something like Sharesight.co.nz

Retirement care is worth a look at these days such as Sommerset or Ryman.

NonprayingMantis

6434 posts

Uber Geek

#1314587 30-May-2015 13:30

Best investment advice I know:
If you have any debts that accrue interest then you are almost always better off paying them off before investing.

mattwnz

20141 posts

Uber Geek

#1314591 30-May-2015 13:43

Kiwisaver? The thing at the moment is that I believe you can withdraw almost all to buy a first home (you will need to check this out first).
Perhaps look at buying a house, although probably not in Auckand, or CHristchurch for that matter, where there are bubbles. House prices in most of the rest of the country are pretty well priced, as many haven't increased much in real terms since the GFC.
But you should really ask to speak to a financial adviser, as they are supposed to be qualified to help you with this type of thing.

grant_k

3539 posts

Uber Geek

Trusted

#1314606 30-May-2015 14:28

Aaroona: I'm just wanting to get an idea of where to start investing a bit of money.

I guess I should start with a few questions;

1. How much many is needed to start investing (though, this will depend on what I'm investing in). Obviously there's generally no minimum, but wanting to get a guideline on where is it enough for it to start counting.
2. Where is a good place to start looking at different types of investments? (any websites, or reputable advisers)
3. I see people saying talk to an investment adviser; are there advisers I need to be wary of (or recommended ones!), or things I need to be asking if I did see one?

Obviously things like Forex trading is pretty risky business, even if you have enough time to keep an eye on it, given how volatile most of it is. So probably want to avoid Forex trading for the time being.
I understand there are risks with investments, and for a rule of thumb, more risk means potentially more reward, but also more loss if things go sideways.

My overall target is really to gain more than the interest the bank gives on any of their accounts, which usually maxes out around the 5% mark.

Some answers for you:
1) I would say at least $5k and preferably $10k. Otherwise the increase in interest is not worth the bother for what you make.

2) Chris Lee & Partners: http://www.chrislee.co.nz/current-investments
I have placed investments with this company for several years now and been very happy with the results. Their fees are very small compared to what you would pay Craigs Investments, Forsyth Barr, which are the 'big boys'. The various brokers from this company travel around the country regularly and meet with clients at no charge. Have a look at either of their newsletters "Market News" or "Taking Stock" to get an idea of where they will be over the next little while. The page linked to above is for Fixed Interest investments which are fairly low-risk compared to shares. If you want a bit more than bank interest rates, but don't want to take too much more risk, they are a good starting point. Next on the risk/reward curve are Listed Property Trusts such as shown here:
https://www.nzx.com/markets/NZSX/sectors/G04
Have a look at each company in the list and take careful note of the Yield, and Share Price vs. NTA. Most of these will pay dividends equating to 5% after tax or more, which beats the heck out of term deposits.

3) With any adviser you consider, ask what their fees are and what commissions they charge when putting you into investments. I place a few investments through Chris Lee where they are new issues, but usually trade the shares or bonds directly via ASB Securities.

Give Forex Trading a very wide berth unless you know what you are doing, and want to spend your life watching exchange rate charts!

Hopefully the above will give you a starting point.

mdf

3513 posts

Uber Geek

Trusted

#1314623 30-May-2015 15:13

More or less what others have said.

Also depends on what you're saving for, and how much. If it's retirement/first home and just smallish amounts, Kiwisaver is hard to beat. For saving your first $1,000(ish), the government adds a tax credit of $500(ish). Nowhere else is going to give you a 50% return at that level of risk. Obviously the returns after that diminish as it's just investment returns (no more tax credits). Unless you are self-employed, your employer is usually required to kick in a certain percentage, and having the deduction from your wages is a set and forget way of doing things.

That said, only suitable for longer term savings.

If you want to be a bit more active, something like ASB Securities lets you trade NZX shares and securities directly for a relatively low cost. You should really know what you're doing though - stocks vs bonds, risk profiles, capital vs income returns etc. If you don't know what this means, start reading before you invest.

For something in between the two, RaboDirect has a managed funds platform that lets you pick particular funds, but then a professional manager handles the individual investments. You pay a fee along the way for this.

Online forex has been mentioned. You can also trade overseas shares directly (i.e. owning google stock) or indirectly (via things like CFDs and other "derivatives) online. But be careful - (1) you can lose more than your initial investment in some cases (this should be spelled out when you're signing up/making trades - don't just click through everything without reading it). (2) You might find yourself in an unenviable tax position. So high risk, all in all. If you don't know what you're doing, you are probably much much better off here.

If all else fails, make an appointment with an Authorised Financial Adviser. Some will do it for free, but be aware that they're likely being paid on commission by the companies they recommend you to invest in. Alternatively, you can find independent AFAs who will put together a detailed investment plan for you, but you obviously pay for the service. Some will only talk to you if you have a reasonable amount to invest.

Disclaimer:- I'm not an AFA, this isn't personalised financial advice, don't in any way rely on anything I've said, all liability disclaimed, tough luck if you lose money, and I have an attack shark too.

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dejadeadnz

2394 posts

Uber Geek
Inactive user

#1314697 30-May-2015 16:41

I'm amazed that no one has mentioned the benefits of index funds so far. The OP should have a look at this: http://smartshares.co.nz/

The costs of entry and ongoing fees are very low. More importantly, it's not too complicated for a neophyte to understand and there's a significant diversification of risk.

xlinknz

1127 posts

Uber Geek

Trusted

#1314726 30-May-2015 17:26

You have probably being told this but it comes down to what risk you want to take, retail deposits are safe and that is why they offer ~5%, the higher the return the greater the risk

Personnally I diversified into shares [safe NZ ones] and am very pleased with the results. So far I am geting 8-9% net divident

Remember don't put all your eggs in one basket

grant_k

3539 posts

Uber Geek

Trusted

#1314743 30-May-2015 18:19

dejadeadnz: I'm amazed that no one has mentioned the benefits of index funds so far. The OP should have a look at this: http://smartshares.co.nz/

The costs of entry and ongoing fees are very low. More importantly, it's not too complicated for a neophyte to understand and there's a significant diversification of risk.

My personal reason for avoiding index funds is I like to have control over which companies my money is invested in. For ethical reasons, I don't want to be funding Sky City which to my mind is a leech upon the poorest members of our society who can ill-afford to be punting their money in a casino. Others will see it differently, but that's my take.

Secondly, there are still fees for SmartShares, and though they may be lower than what Craigs et al charge, any fees still come out of your profits, so I prefer to make the investment decisions myself and 'cherry pick' the companies in my portfolio. For example the SmartShares top 10 NZ fund contains:

FBU    Fletcher Building Limited    Building    17.37%
SPK    Spark New Zealand Limited    Media & Communications    16.08%
AIA    Auckland International Airport Limited    Ports    12.53%
RYM    Ryman Healthcare Limited    Finance & Other Services    11.62%
FPH    Fisher & Paykel Healthcare Corporation Ltd    Intermediate & Durables    10.93%
SKC    Sky City Entertainment Group Limited    Leisure & Tourism    7.19%
SKT    Sky Network Television Limited    Media and Communications    6.88%
CEN    Contact Energy Limited    Energy Processing    6.59%
XRO    Xero Limited    Finance & Other Services    6.43%
TME    TradeMe Group Limited    Finance & Other Services    4.37%

I own about half of those but have avoided Sky City for ethical reasons as mentioned above, and Xero because I don't trust their business model. XRO may eventually turn a profit, but it's far from certain, and a lot of expectation is built into their current share price. If their business plan doesn't work out, substantial losses will certainly result. Others like AIA and FPH have been stellar performers year after year, with CEN and FBU doing reasonably well too, if considered over a 5-year timeframe.

Everyone will see it differently, and therefore have different levels of risk tolerance, but mine is pretty low so stocks like XRO are best avoided. I am content to settle for lower rewards in exchange for less risk. It's a strategy that has served me well for 15 years now.

TwoSeven

1623 posts

Uber Geek

Subscriber

#1314833 30-May-2015 20:21

You could try talking to your bank. Things like high interest bank accounts and term deposits can be a good start for learning about.

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Aaroona

3196 posts

Uber Geek

#1314840 30-May-2015 20:42

Thanks all for the replies.

I'm in my early 20's, so I think I can afford to look at a medium-high risk profile at this stage. I'm not currently saving for a house at point, since really, I think it's an unrealistic pipe-dream in the current market, or at least, certainly within Auckland, which is the only place I can see myself living for the foreseeable future.

I'm not really interested in the low risk-low return, long term deposits the bank do. I am looking to get a return equal to, or above 9% if possible. Long term deposits from the bank seem to give maybe a 4-5% return, which isn't a great deal.
I will have a further look into the different kiwi-saver schemes that are available, especially given the employer contribution and how quickly that can help things grow.
I do know there are some higher-risk schemes you can get into for kiwisaver - I believe one of my colleagues at work is in one which would be considered high-risk (or medium, maybe).

Will also look into a few of the options mentioned here. I may very well seek out some assistance from an AFA soon, just want to get some general knowledge from everyone here before I go down that route.

Looks like I have a bit of reading to do :)

lxsw20

3552 posts

Uber Geek

Subscriber

#1314844 30-May-2015 20:55

Technically speaking only a registered financial advisor should be giving you investment advice.

Aaroona

3196 posts

Uber Geek

#1314845 30-May-2015 20:59

lxsw20: Technically speaking only a registered financial advisor should be giving you investment advice.

There's no rules against people telling me what they do. I'm not asking for specific advice on specific share trading or anything, I'm asking about more generally, what you guys do for investments and if you have any info that would be helpful for me to read.
Obviously I'm not going to go buy 10,000 shares of some strange, recently listed company on your recommendation.

nickb800

2715 posts

Uber Geek

Trusted

#1314873 30-May-2015 21:54

You haven't said how much you have (I understand why you wouldn't!) but this determines things a bit - grant_k's strategy would have considerable entry/exit fees - brokerage fees tend to have a minimum which adds up doing lots of small value transactions - say a portfolio of 10 stock $5k each. Diversification is key, and index funds are the cheapest way to get diversification with low balances.

Options as I see it:
- Vanguard index fund. Vanguard is a mutual company (owned by members) which runs a range of funds listed on the ASX including Aussie and international index funds with pretty low fees. Con is that you need to pay brokerage fees (e.g. ASB securities) to buy/sell
- Smartshares index fund. Owned by NZX, no entry brokerage fee as you buy directly from smartshares. Not sure of exit fees.
- RaboDirect enables purchases of various managed funds (e.g. Fisher, AMP) with minimal minimum purchase and fees. Range of NZ and international options

Personally, I have a bit in managed funds through Rabo, but aim to cash things into a high-interest savings account to buy a house in the short term. Otherwise I'd be in with Vanguard

Re: Chris Lee, a lot of his clients lost a lot of his money after investing in finance companies at his recommendation. Not a black mark, but do your research first

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