Now that I'm planning to finish working at 67 and will have $60,000 in KiwiSaver, I'm wondering if last Saturday's Brian Gaynor article on NZX heavyweights might be an easy solution.

I'm inexperienced in the sharemarket, after a minor burning in the 1987 crash, but no longer want to invest in rental property.

On reading that Ryman Healthcare has returned 23.1 per cent return since listing in June 1999, I wondered if putting my $60,000 into Ryman shares might return me the 10 per cent yield I'd ideally like - say $500 a month. Is that sort of a return from dividends a pipe dream, or what might some alternatives be with a reputable provider?

Going on what I have read in your columns over the past year, I recently invested a $150,000 legacy in Smartshares, but am hoping not to use that for 10 years.

After a lifetime of both of us working, raising a family and having no debt now, we don't have too much to worry about in the future. My $60,000 Kiwisaver will be pocket or travel money, but I do want to keep some independence.

Did you notice that Gaynor - while noting the superb performance of five New Zealand shares last week - also wrote about what an appalling investment Wynyard Group has been? Some shares perform really well, while others perform horribly.

And just because a share has done well in the past, that doesn't mean that will continue. The company might have the right management, growing markets and growing profits. But that doesn't guarantee the share price will keep growing.

How come? While you might have only just become aware of how well Ryman has done, professional investors have been buying the share for years.

By the time you buy, their demand will have pushed up the price to a point that it might or might not be a good buy. If the company continues to do even better than the experts expect, the price will keep rising. But if it's disappointing - perhaps still growing but not as fast as predicted - the share price might stagnate or even fall.

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Nor should you count on a dividend flow to continue. History is full of stories of strong dividend flows declining.

It's never a good idea to invest in any single share - regardless of its history. Generally, investors who take more risk get higher average returns, but the risk from flying solo is not rewarded on average.

If you invest, instead, in 20 or 50 different shares, your average expected return is about the same as on a single share, and your risk of losing heaps is much lower. Sure, you also miss out on making a huge return if your one share is the next Ryman. But most people are willing to give up the chance of winning big if it also means they won't lose big.

The obvious way to invest your $60,000 in lots of shares is in a share fund. And Smartshares funds are a good place to start, or you could stay in a share fund in KiwiSaver. But I'm not sure those would be the right spots for your $60,000.

It sounds as if you plan to spend the money over the next few years, so I would suggest boring old bank term deposits. There are no 10 per cent yields, but you can be almost certain the money will be there when you want it - not diminished by a share market downturn.

P.S. Don't come crying to me if Ryman does, in fact, continue to excel. It might. But it might not.

Dark secrets

Your recent presentation of Vanguard statistics showing that indexed funds outperform actively managed funds in the long term was met with the usual finger-pointing from vested interests.

Wall Street and the financial services industry at large have a dark secret, one that costs investors trillions of dollars each year and quietly drains investment portfolios and retirement accounts of almost every investor.

You ask if readers could point to other research. I would refer anyone interested in exploring this further to read Mark Hebner's book Index Funds: The 12-Step Program for Active Investors.

There is a wealth of information and charts showing relative performances of various indexes in the US and internationally dating back to 1927, plus a history of studies and analysis by many distinguished academics (including Merton Miller, the University of Chicago's Nobel laureate in economics, whom you mention).

Hebner is the president of Index Funds Advisors in California. His flagship website is considered the leading internet source of information on index funds, and a convenient starting point for readers.

I haven't read Hebner's book and I didn't know about the website - but it looks good. Thanks for writing.

Passive payoff

Bart Frijns, professor and director of the Auckland Centre for Financial Research at Auckland University of Technology, has apparently done KiwiSaver research and similar analysis confirming passive over active investment.

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Thanks for responding to my request for New Zealand studies on this topic. Frijns' research is indeed interesting.

In JASSA, the Finsia Journal of Applied Finance, he writes firstly of many US studies that find most active funds don't perform better than passive funds, once you take into account extra risk taken by active managers. And "the evidence on fund performance in Australia and New Zealand is not very different".

He cites three pieces of Australian research, and then says, "The research done on the New Zealand market paints a similar picture." One study looked at 143 funds in New Zealand from 1990 to 2003 and found "these funds on average have not been able to outperform the market".

Frijns then writes of research he and Alireza Tourani-Rad published last year in the Pacific Accounting Review that found "no evidence of systematic risk-adjusted outperformance of KiwiSaver growth funds, and in several cases, there is evidence of significant underperformance".

The KiwiSaver paper adds that there are important implications for KiwiSaver investors.

The result "implies that investors need to be prudent about fund fees and should not pay high fees for self-proclaimed superior investment skills."

The JASSA paper concludes, "A fund manager who mistakes his ability for talent (and charges a high fee), but in reality is doing nothing more than taking exposures to known risk sources (which can be achieved at a much lower fee), will not only be overcharging his customers for a skill that he or she does not possess but also exposing customers to risks that are not communicated to them, and are probably not well understood."

You can find links to these papers at this website.

On average ...

I enjoy your articles but have to call you on some maths. You say "Mathematically only half can be better than average in the short-term".

It is important not to confuse counts with averages. Theoretically, a lot of players could be earning close to market average, and a small number of stars could be consistently outperforming it based on whatever magic they use.

A classic mind-bender is the mathematical statement that over 99 per cent of people have more than the average number of legs.

Touche! I should have said something like, "Generally only half ..."

The fact is, though, that the research - looking at many different funds in many different countries over many different years - almost always finds that roughly half the active funds do better in a single year, but the same funds don't keep doing well.

Hold the debate

I'm a 31-year-old male living in Auckland. I have a partner and 14-month-old son.

I religiously read and enjoy your column. However, as of late I have found it not so enjoyable due to the fact people seem to be trying to correct you and challenge you. I don't enjoy re-reading comments from the previous week's topics.

Is it possible for you to go back to how your column originally started and answering relevant questions and educating us all?

Sorry if you don't like the debates that sometimes rage in this column.

When I write about motherhood and apple pie investing strategies, such as the importance of diversification, almost nobody disagrees. But surely it's good to also discuss the controversial issues, and let readers hear from both sides.

Stick around, though. After a while these issues always die down, and we're back to apple pie.

Opinions wanted

I am a young professional who has been looking for advice on funds for a while. I would like to express my appreciation for your openness and use of studies in your article published on Saturday. I look forward to reading more of your "opinions". Please don't stop.

It just shows you can't please all the people all the time!

KiwiSaver credit

My son is moving overseas next year to advance his career. He will have no New Zealand income and may not return to New Zealand, especially in the short to medium term - but I think he should continue his KiwiSaver contributions so as not to miss out on the $1043 "tax credit".

However, if you have no New Zealand income, how does the tax credit manifest itself, if at all? It's actually incredibly poorly named, as it isn't a tax credit at all. But the question remains.

I quite agree about the name. It's good that it's not a tax credit, as that would benefit high income earners more. But I still occasionally hear people saying they won't join KiwiSaver as they don't pay tax and so can't benefit from the tax credit. That's a pity, because those people could often really use a bit of help from the government.

Just calling it the KiwiSaver credit would have been better.

Anyway, I'm afraid I've got bad news for you. The tax credit isn't paid to people not living in New Zealand - unless they are NZ government employees or volunteering or working for a specified charity for token payment.

Still, if you can persuade your son to keep up his contributions, he will be glad in retirement, wherever he lives. He might, though, benefit more from contributing to a retirement savings scheme in the country he lives in - especially if it offers tax breaks or other incentives.

Once he's been overseas for a year or more - if it's anywhere other than Australia - he has a couple of options with his KiwiSaver money:

• If he can provide proof that he plans to stay away permanently, he can withdraw all his KiwiSaver money except all the tax credits he has received. They go back to the government. It would be a pity if he takes out the money and blows it on good times, but he might put the money to good use.

• He can wait until he reaches NZ Super age, and then withdraw the lot, including tax credits.

If he's living in Australia, he can't withdraw the money before retirement, but he can transfer it into an Aussie super scheme if he wishes.