I decided to share this on my blog as well – some advice I gave to a colleague when he expressed interest in what I was investing in. People are stunned when I come up with this in conversation, but it’s not that I’m an investing guru – I’ve just read lots of great blogs on the matter. And I’ve had many years of practice and making mistakes – ever since my Dad got me started with a decent sum of money in an investment account for me to work with (Thanks Dad!!).
I started off with sharing the best investment series I’ve ever read. I love Jim’s blog – he’s got heaps of great advice and a fantastic writer. 🙂
What I invest in
Downsides to direct investment in AU Vanguard:
- International investments over $50k (single account) or $100k (joint account) will mean you’ll have to pay FIF tax. Below this you’ll need to pay tax on the dividends you receive. Over $2500 a year in RIT kicks you into provisional tax regardless!
- You’ll have to be disciplined to not sell your shares if there’s a market crash, and you’ll be tempted to fiddle with the assets – buy/sell when you think the market is high or low. It doesn’t work – you just have to leave it X)
- Each purchase incurs broker fees, so you have to do the math (And save up enough) for a purchase that’s enough to meet the minimum brokerage fee, else you’re leaving money on the table.
- The US and world index funds don’t re-invest the dividends for you. You’ll be sent Australian cheques that you then have to cash in at the bank where the tellers need to work out every single time how to process an international check! You can pay your broker to handle that, but it’s more money on the table you could be saving instead.
- You need to do the purchasing of shares every now and then – can be anxiety provoking.
Alternative to investing in the market directly yourself:
Alternative, alternative to investing:
- Check what fees your Kiwisaver company is charging ( SuperLife was the cheapest when I signed up)
- Make sure your Kiwisaver is going into a “growth” fund or similar that invests mostly in the stock market. You don’t want it in a “income” or “conservative” type fund – that’s for seniors who are about to cash out 🙂
Kiwisaver is awesome because the employer contribution is like getting a 100% ROI right off the bat. There is no investment that will give you 100% back for your contribution. I think my company matches up to 3% or so, but there’s nothing stopping you from paying in more to save up.
I think I’ve had a ROI of 110% so far with the employer and government contributions, and the investment growth – WIN!