I have had money in FNZ (NZ sharemarket index fund based on the top 50 companies) since August 2016. In that time the units have had a capital gain of 9.5 per cent and a dividend of 3.11 per cent (that's total over the period), or less than 7.2 per cent when annualised.

I bought at $2.31 in August 2016 and the shares fell to $2.05 by December 2016.

They've had a slow climb since then to $2.53 today. I am in this for the long term, but I suggest it is misleading for the Herald to talk about a 22 per cent gain in the sharemarket last year when the FNZ, which is supposed to represent a diversified average portfolio, has done okay but nowhere near 22 per cent in a year.

I have a rental property which increased in value from $720,000 to $906,000 over the same period, or 26 per cent (about 15 per cent annualised). My wife hates the sharemarket as it has been underperforming for a long time, at least the last decade.

Case in point: FNZ were at $1.56 10 years ago. So over 10 years people have earned 62 per cent. That's 4.9 per cent compounding, which is pretty bad for a diversified shareholding over a period when there has been nothing but talk about recovery from the global financial crisis and New Zealand's rock-star economy.

You've committed two research "sins" in your comparisons:

• Judging a share investment over too short a period in your first couple of paragraphs.

• Using a single property to represent what's happened to the rental property market.

For the benefit of others, FNZ is a Smartshares exchange-traded fund, or ETF. In many ways it's like other share funds, such as higher-risk KiwiSaver funds, but you invest in an ETF in the same way as you invest in a share listed on the sharemarket.

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FNZ holds all the shares in the S&P/NZX 50 Portfolio Index, which covers the 50 largest companies, with no more than 5 per cent of the fund in any one share.

Despite what you say, during 2017 an investment in FNZ did, indeed, increase by 22.3 per cent, says NZX, which runs Smartshares. But for the first few months after you bought in August 2016, the price of FNZ fell, as our graph shows. So your overall performance so far is not nearly as good.

A share price is always going to wobble. That's why I have two "rules" about investing in shares or a share fund:

• Use money you don't plan to spend for at least 10 years. That gives enough time for recovery from market downturns.

• Don't withdraw earlier, especially when there's a downturn. Hang in there, and things will come right.

In your last paragraph, you do look over a longer period, 10 years — great. NZX says the average return over the last decade is 5.2 per cent after fees, rather than your 4.9, but that's probably because you're looking at a slightly different period.

While a return of around 5 per cent a year is not exciting, a glance at our graph shows the decade includes the global financial crisis of 2007-2009. Over the past half century, that plunge was second only to the 1987 crash. So 5.2 per cent over a decade that includes such a downturn is not too bad.

As it turns out, the growth of the sharemarket is also faster than the QV Quarterly House Price Index over the decade. Your rental property's value grew more, but the average property didn't. It's true the house price index doesn't include rent, but for many landlords, that's offset by mortgage interest and other expenses.

I don't want to reopen the shares versus rentals debate. We've had enough of that lately.

Let's just say both have done well in recent years. I'm afraid your wife has got it wrong.

KiwiSaver withdrawals

I have just turned 65 and want to withdraw some of my KiwiSaver funds. ASB sent me a form to fill in (which is not freely available on the website) and said it could take up to 15 business days if I want a full withdrawal and up to 10 working days to even get some of my funds.

Additionally, when I advised that I wanted to fix a minimum unit rate at which to cash in, they told me I could not do this and I will have to accept whatever rate they advise me is current when they action my withdrawal.

I have had non-KiwiSaver managed funds and have always been able to fix a minimum unit rate at which I would cash up units. I do this in case there is a sharemarket crash on the day my request for funds is processed.

The way ASB is processing KiwiSaver funds, I can't decide not to sell if the unit rate is unacceptable. What's more, it gives them the ability to manipulate rates on any day when there are large withdrawals. This is not transparent and takes away control from the client.

The form also states it will withdraw the amount proportionally over the different funds in which I have invested, even though on the phone they have said I can withdraw from one particular fund, which is what I want to do. We should be able to state which fund we are withdrawing from, and the form should reflect that.

Let's take your issues one at a time:

• How long it takes to get your money out. An ASB spokesperson replies: "While it could take up to 15 days, ASB continually strives to process full withdrawals as quickly as possible." It's similar with partial withdrawals, but with a maximum of five business days. Why so long? "Once a member requests a withdrawal, ASB needs to confirm eligibility and make sure we have all the information needed to pay customers correctly," she says. "Full withdrawals also require us to work with Inland Revenue to make sure the member gets the right member tax credit amount."

• Setting a minimum unit price for a withdrawal: ASB doesn't offer this for its KiwiSaver or non-KiwiSaver funds, "because unit prices (which involve global assets) are only finalised after a transaction is initiated," says the spokeswoman.
However, she points out two ways to deal with the worry that you might make a large withdrawal on a day when the market falls. One is to gradually move your money into a lower-risk fund as you approach the withdrawal time.

"Selecting a (higher-risk) fund with more growth assets means the customer needs to time the market, which is hard to get right. For example, if a customer was invested in the Conservative Fund, on February 5 this year (a day of particularly high volatility), the value dropped by 0.46 per cent, compared to a 1.9 per cent drop for the Growth Fund."

This suggestion might not work if you want to take your money out now. But it's good advice for others. I've always recommended that any money you plan to spend within the next two or three years should be in a low-risk fund or bank term deposits.

However, the second way might work for you. That is to withdraw the money over time. Even if it's just over several days or a few weeks, that reduces the chance of a big loss because of a sudden market fall.

ASB and many other KiwiSaver providers let you set up regular payments to your bank account. "A regular withdrawal enables a top up of weekly income, bringing certainty to managing money in retirement while also minimising the impact of market volatility," says the spokesperson.

• Concerns about ASB's "ability to manipulate rates on any day when there are large withdrawals".

The response: "ASB does not manipulate rates. Unit prices are calculated based on underlying asset values, and there are processes in place to ensure the valuations are accurate, including constant monitoring and independent audits."

• The ability for people with more than one fund to withdraw from just one fund: "This is something we can do if specifically requested," says the spokesperson. But she adds, "The vast majority of our customers are invested in one diversified fund suitable for their investment needs, so wouldn't need this functionality. We encourage customers to contact us if they have questions, as we're always more than happy to discuss their retirement and investment goals, and which funds will help them get there."

If you're not happy with these answers, you can always move to a different KiwiSaver scheme.

Risk and returns

Further to the current comments regarding term deposit rates, it is always worth calculating how much additional net interest results from making a higher rate deposit with a higher-risk institution.

For example, the 12-month rate for $100,000 with a mainstream bank is around 3.5 per cent. Interest earned is $3500, minus tax at say 17.5 per cent, results in a return of $2887.50.

The 12-month rate at a highly-rated finance company is 3.7 per cent, and using a similar calculation gives a return of $3052.50, an increase of $165. And at a lower rated finance company, the 12-month rate is 4 per cent, with net return being $3300, $412.50 more than the bank, or $34 a month.

I believe a depositor needs to take into account the institutional risk versus interest return on their funds. In this case, is the increased risk of principal default worth $400?

An excellent point. And the differences would be even less if you're on a higher tax rate.

Taxation review

In a recent column, it was great to see your hope the Tax Working Group gives a high priority to taxation simplicity. However, I wonder how you manage to reconcile this objective with your apparent stated support to "start taxing capital gains properly".

Both the earlier 2001 and 2010 tax review groups clearly concluded, among other things, that these two objectives were incompatible, resulting in recommendations against introducing capital gains taxes. What has changed since to justify a different conclusion now?

This question needs to be answered, particularly by Sir Michael Cullen, chairman of the Tax Working Group, as he accepted the recommendations of the 2001 tax review not to introduce such a tax in his then role as Minister of Finance.

In addition to property investments, I also wonder what might be captured under such a tax — obviously investment in shares, but what about cars, boats, art, collectibles, other household chattels? Where should it stop?

You're quite right that it's impossible to make tax both fair and simple. But that doesn't mean we shouldn't try to move closer to both objectives. The current system is not as good as it gets.

On Michael Cullen's views, I have never accepted that politicians, and ex-politicians, should never change their minds. On the contrary, they must be open to new knowledge and views. As for cars, boats and art, mostly they don't gain value. It might not be worth the hassle including them. But that's clearly not true of property and shares.

Mary Holm is a freelance journalist, a director of the Financial Markets Authority and Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. Her website is www.maryholm.com. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to mary@maryholm.com or Money Column, Private Bag 92198 Victoria St West, Auckland 1142. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Sorry, but Mary cannot answer all questions, correspond directly with readers, or give financial advice.