Investing from New Zealand

Disclaimer : I’m not a financial adviser, this is just my opinion, don’t hold me accountable should you follow anything I say and lose money etc etc.

So we recently moved to New Zealand, that’s a huge blog post just by itself.  But I thought I’d share what we’ve discovered so far about investing from here.  Actually, this post was originally “Investing in New Zealand”, when I realized that wasn’t quite accurate…

Love affair with property

Firstly, New Zealanders love their property.  The New Zealand stock market is quite small and the top 20 biggest stocks has no less than 3 Property Investment companies.  The property market in Auckland is a bit ridiculous at the moment.  There are daily headlines in the New Zealand Herald about the “unaffordability” of housing in New Zealand, and “what the government should be doing about it”.  Banks are fighting each other tooth and claw to give away mortgages.  Credit is easy, no-interest and 100% mortgages are even easier.  It’s like the USA housing crash never happened, or we reckon that since we’re an island we’re all good. (Don’t you know that the housing shortage will mean prices can never go down??  Where have I heard that before….).

Australia to the rescue!

So we had a look at Big Brother Australia – a much bigger stock market, more options, and Vanguard.  Yes my fellow Australasians, it’s available in a very convenient location.

For our broker, we decided to go with ASB Securities, since they only charge a trading fee not the percentage fee that DirectBroking carves out of your entire portfolio.

Through them, we’ve purchased NZ index Smartshares FONZ, the iShares ASX 200 index, and more recently the Vanguard ETFs that’s available through the ASX.    Smartshares was our first foray into the New Zealand stock market, but has a rather nasty expense fee.

Foreign Income what?

Note that overseas investments are subject to the “Foreign Investment Fund” tax, which is some ridiculous government scheme to try get around the fact that some overseas shares don’t pay out dividends.  It’s a flat tax based on 5% of your starting portfolio at the beginning of the year, if your investments grew by 5% or more, so worst case scenario 30% (our tax bracket) of 5% of the entire overseas portfolio.  Australian and New Zealand stocks are excluded, which is why sadly we probably won’t be investing too much overseas….  There is a $50000 limit – if you have less than this invested overseas, you don’t need to worry about it.

Dividend payouts

Ok, so you’ve opened a investment broker account in New Zealand, you’ve phoned them up to order yourself some Vanguard shares, and now you’re eagerly awaiting the money.  Not so fast!  Your job is not done yet… Vanguard at best might send you an Australian cheque with any dividend payouts (Vanguard doesn’t have a re-investment scheme for some ETFs offered on the ASX).  At worst they might keep it until you get your stuff sorted out…  The cheque is not a great option – ANZ charges us $15 to cash an international cheque…  This was only a $50 dividend by the way, so we were not very impressed.

Solution?  Open an Australian bank account!  Apparently it’s easy as!  (As long as you are going to Australia some time soon….)  Cue hilarious scene where we go to the bank with the necessary documents to identify ourselves, get fobbed off to the Australian branch, who phones us, and tells us to go back into the New Zealand branch with the *same* documents to identify ourselves.  We are still trying to get the bank account opened – apparently it will be easier to schedule a holiday to Australia, that’s what all the New Zealanders do apparently (Or just eat the cheque fees without realising what a compound effect it will have on their savings)

 

Good luck with your investments, and remember to diversify and play it safe 🙂

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s