Fund supermarkets are making investing easier for a growing band of Kiwis.
Sharesies, InvestNow and Hatch are three of the biggest platforms. Between them, they offer a mixture of New Zealand and international shares, exchange-traded funds (ETFs), and managed funds from as little as $5.
Each has a tribal following, convinced that their own platform choice is better than the others.
• Sharesies enables ordinary Kiwis to invest from $5 in any of 18 different funds. The funds are from well-known managers such as AMP Capital, Pathfinder, and SmartShares. Sharesies has done an amazing job at demystifying this type of investment and marketing itself to first-time investors.
It charges $30 a year, or there are monthly options. You'll also pay fees within your funds to the managers, but you don't see them directly.
• InvestNow is somewhere you can go shopping for both mainstream and obscure funds, some of which aren't usually open to ordinary investors. It offers more than 100 funds, has a minimum investment of $250 for one-off purchases or $50 a month as a regular investment plan. InvestNow also offers term deposits. The site's fees are marginally cheaper because it doesn't charge annually fee. You only pay the standard fund fees. InvestNow makes money from managers who pay to have their funds on the platform.
• Hatch from Kiwi Wealth (Kiwibank) gives investors direct access to US shares, fractions of shares, and ETFs. You may not want to buy one Apple share at NZ$2560. Buying a fraction can make sense. Hatch offers 2700 companies listed on the NYSE and NASDAQ exchanges and more than 450 ETFs. You pay exchange rate fees plus $4.60 for a fraction of a share purchase or $8 minimum for one or more shares.
But which is the best? Reddit, Geekzone, Following the Barefoot Investor NZ, and other popular forums all sport discussions about the best digital platform in New Zealand. The answer is down to what you want to invest in, how much you have to invest, personal preference, what tax rate you're on, and how you view the risks involved.
Binu Paul, founder of the PocketWise comparison website points out that you don't actually need to use one of the three sites to get diversity in your investing.
Many fund providers such as Milford Asset Management, Harbour Asset Management and QuayStreet offer a wide variety of funds for investors. Banks and other KiwiSaver providers have a range of other funds on offer to customers.
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Smartshares and SuperLife are more fund providers than platforms. But both offer a wide range of funds of their own but also from leading international fund houses such as Blackrock and Vanguard that are difficult for Kiwis to access.
The advantage of using one of the three is that you can have all your investments in one place, meaning one login, and one location for tax information.
There is way more complexity to your choice than I can write in one article. Paul points out, for example, that InvestNow uses a third-party custodian to hold your investments at arm's length. This isn't the case with Sharesies, which is its own custodian. With Hatch your investments are held offshore, which some Kiwis may not like.
InvestNow founder Anthony Edmonds points out that investors need to look at their own personal tax situation before making a decision. Many investments are Pies (Portfolio Investment Entities, which pay marginally lower taxes for high earners). If your marginal tax rate is less than 28 per cent you may be paying too much tax.
"While people can get a credit for this extra tax against their normal income, it means that they have to do a tax return," says Edmonds. Children who have no income to claim against would be paying far too much tax.
Hatch's US shares aren't Pies. What's more, should you buy a total of more than $50,000 of foreign shares on the platform, you might be hit with Foreign Investment Fund tax, which is a bit of a bitter pill for some.
Tom Hartmann, content and communications manager at the Commission for Financial Capability says investing platforms have made it easier for people to get started investing, to buy units with low dollar amounts. "But are they helping people do a good job of it?" That depends on the risks, returns and how much money makes it back into their pockets.
Hartmann says investors need more than just shares and share-based funds to get the right overall investing mix. He recommends they visit Sorted's Kickstarter at Sorted.org.nz/tools/investor-kickstarter before investing.