The Herald's Cooking the Books personal finance podcast is here to get you the tips you need to weather the financial storm. Hosted by Frances Cook, with a new money expert featured on each episode.
My inbox has been hammered lately by people who want to start investing.
Good on you – if you're stable, now is as good a time as any to start the investing journey.
You do have to first make sure you have emergency savings, a (somewhat) stable job, and are mentally prepared for the sharemarket to continue its current rollercoaster.
But we've covered those warnings in previous columns and podcasts. Once you've got those issues sorted, the more pressing issue is how? What's the best way to start investing, and what are the nuts and bolts of it?
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Any of the options need to be low fee, easy to use, and give you access to the investments that suit your plan.
In recent years online investing platforms have made it much easier and cheaper to get started than it used to be.
The big three are Sharesies, InvestNow, and Hatch. There are others, but these are the most commonly used.
Sharesies has an easy to understand website which gives access to a wide range of funds, and individual companies. It also recently announced it will launch United States shares, although we've yet to see what that will look like. You can put in as much money as you like, or as little as $5.
InvestNow has a wide range of funds, including highly respected international funds such as Vanguard. You can invest with as little as a $50 a week recurring payment, of $250 one-off investment.
That is more than Sharesies but still far less than you were previously expected to invest before these online disruptors came along.
Hatch was the first to offer "fractional investing" in overseas shares. The big companies, such as Amazon or Facebook, can be a great investment. But Amazon is US$2328 for a single share at the time of writing.
Hatch lets you buy a fraction of a share for a much lower price, so you can invest in companies that you believe in. It also has funds.
Then there are the non-KiwiSaver funds, which you shouldn't overlook.
They're run the same way as your KiwiSaver, mirroring the investments in the company's KiwiSaver funds, but you're allowed to break into them any time you want rather than having to wait until you turn 65.
SuperLife and Simplicity are two that are known as very good options, but many KiwiSaver providers have them.
When you're deciding who you want to go with, look at their fees very carefully. There is often a fee for the platform, and there might be another fee for whichever funds you want to invest in.
Fees are fair enough, because people are doing work – but it's extremely important you find the lowest fee possible. Otherwise the middle man will eat all of your investment profit.
If fees are 3 per cent, that's not 3 per cent of any money you make. It's charging you 3 per cent on every dollar you invest through them – whether they succeed in making you money or not.
Consider that an average return from the sharemarket, taking into account inflation and both good and bad years, might be 7 per cent.
In that case, a 3 per cent fee will take 43 per cent of any money you make. It's huge.
The online platforms will often have fees under 0.5 per cent, and that's far more reasonable. You don't get what you pay for with fees – studies have shown the more expensive providers often deliver the same results, or worse.
Lastly, are these investing platforms safe?
In New Zealand we have a "custodian" system, set up by the Financial Markets Authority.
Nothing in life is 100 per cent guaranteed, but this system makes your money far safer. Each investing platform should have information about their custodian system on their website.
In general, while you invest through the platform, they don't "have" your money. An independent custodian does that for you.
So if the platform went under, your investments should be independent, untouched, and not used to pay off creditors. It's also much harder for fraud or embezzlement to occur.
So that's how you vet them. Now it's up to you to decide which one fits your financial plan the best.