Tag: Investment Advise

Advise to a friend

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. 🙂

His full series on investing

If you don’t have time to read all of that (it’ll take a while, don’t blame you), read through these first:

What I invest in

Advise below is from a New Zealand point of view, where I mention FIF or taxes, review your own country’s policies on foreign investment.  If you’re from AU, UK or US you can invest in Vanguard directly and then you just need to follow standard investment tax information.
My hubby and I invest in Vanguard ETFs – VAS (Aus 200 index) VTS (US index), VEU (world index) and NZ index SmartFunds

 

NZ SmartFunds are an easy place to start, but they have quite high management fees
 0.75%.  It doesn’t sound a lot, but it adds up over many years!!
Inline image 2
Vanguard – yay! VEU is only 0.13%
 Compare to Vanguard which is from 0.05% to 0.20%

 

Inline image 1
SmartFunds – 0.75% – not so smart 😦

 

 

Smart Funds allows you to sign up and invest a small amount monthly, like $100 or $500 – might be a good way to start saving and investing, then the investing bug might bite!

 

Downsides to direct investment in AU Vanguard:

  1. 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!
  2. 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)
  3. 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.
  4. 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.
  5. You need to do the purchasing of shares every now and then – can be anxiety provoking.

Alternative to investing in the market directly yourself:

If you don’t feel confident to tackle the stock market just yet, sign up for a managed fund like SuperLife – they charge lower fees than most fund managers, as they in turn invest in low fee ETFs themselves.  They’ll diversify your portfolio for you across international and local markets, plus they handle all the tax for you as it’s a PIE fund – WIN!  They are pretty much investing in Vanguard like ETFs and Smart Shares on your behalf.

 

 

If I didn’t know too much about the stock market already, and didn’t really enjoy managing my portfolio and tracking it myself, I’d sign up for this.

 

Alternative, alternative to investing:

Simply increase the percentage you save on the Kiwisaver you’re on (You are signed up for it right?? ) [Note this is the NZ equivalent of a employer match saving scheme into a fund that you can’t withdraw on until a certain age/retirement)

 

It’s got tax incentives (I think…) and it should be a fairly decent investment.  You will need to just…
  1. Check what fees your Kiwisaver company is charging ( SuperLife was the cheapest when I signed up)
  2. 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!

Downside is you can’t withdraw until a certain age, except for when you want to buy your first home.  Not being able to withdraw the money could be a good thing!
Hopefully this was useful, and good luck with starting out in investing!!