Getting started in investing can be daunting. By dipping your toe in the water of shares, funds, property and other investments you can learn as you go.
Not long ago you really needed $1000 or more as a minimum investment and the brokerage fees made buying and selling small investments unprofitable. Thanks to disrupters such as Sharesies, Hatch and other investing "platforms", first-time investors can get started for quite literally a few dollars at a time.
Low-cost online platform Sharesies in particular has grabbed the hearts and minds of many first-time investors. The idea is you buy small amounts of your chosen investments regularly and learn as you go, says co-founder Leighton Roberts.
Some customers are investing $5 a week, although the average is $30, says Roberts. They choose either individual New Zealand shares, or from a range of managed funds.
Customers learn about important concepts such as asset allocation, risk and return and diversification as their investments grow.
When Roberts was younger, the percentage of income his parents suggested he invest left him little money for going out. It's different with Sharesies, he says. If you start small your investments become fun in their own right. Many investors choose to get started with companies they know and love, such as Air New Zealand.
But don't invest in shares and funds if you haven't paid $1042 into your KiwiSaver for the year. KiwiSaver is the only investment in New Zealand that pays a 50 per cent return (from the government contribution) plus investment growth. Even more if your employer contributes.
Some first-time investments can include:
You too can own a small share of a2 Milk, Spark, Apple, Netflix, and many other Kiwi and overseas companies. Hatch specialises in US shares such as Apple and Netflix. Australian-based platform Stake, which has a similar offering, is expected to launch in New Zealand shortly. At Sharesies your individual fees are just cents on small investments, but you pay an annual (or monthly) custodial fee. Hatch fees on each purchase are a bit more, but still reasonable and there is no annual fee.
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Managed funds spread your money over a number of shares or other investments such as bonds. They may invest in only shares from a particular region, or may have a theme such as being environmentally responsible. As well as Sharesies, InvestNow and SuperLife Invest are two other platforms that you might graduate to once you've got some more money under your belt.
You may not be able to buy your own home yet or a commercial property. You can, however, invest small sums in managed commercial property funds. In the near future two online platforms Jasper (commercial) and The Property Crowd (residential) are set to launch offering a very low entry for investment directly into individual commercial buildings and residential rental properties.
Platforms such as Lending Crowd and Harmoney offer something different. You can lend from as little as $25 a time over the platform to individuals who need to borrow. By doing this on the platform you cut out the middle man and get a greater return than you would in a term deposit. Returns are anything from 7 to 14 per cent. These platforms aren't always transparent and the risk can be high, as you'd expect with such returns.
First-time investors should avoid currency and financial derivatives trading, which are volatile and best left to the experts. Like investments in gold and other precious metals these investments don't pay interest or dividends.
Finally, no one has the Midas touch. Too often, first-time investors put all their money into one investment, which lo and behold falls in value or fails. Or they think because they've made 15 per cent over the first few months that it's a one-way track to wealth. It isn't. This is gambling and sooner or later you'll get a sharp shock.