Kiwis are signing up in droves to use online investment platforms, despite the New Zealand sharemarket having had a rough start to the year.
The NZX50 benchmark index fell by 3.34 per cent in the first six months to June 30, in stark contrast to overseas markets. Australia was up by more than 9 per cent while US sharemarkets have seen double-digit growth.
Sonya Williams, co-founder and co-chief executive of Sharesies, which offers thousands of investments in New Zealand and overseas, says 135,000 people signed up in the first six months of this year, meaning the platform is tracking even better than last year, when 195,000 people signed up over 12 months.
Pre-Covid in 2019, 48,000 people joined the platform, which allows people to buy and sell shares and funds in this country, Australia and the US with as little as $5.
"Obviously the growth over last year was a real step change from the year before, but we are definitely seeing that people are still really interested now. I think it was a real catalyst for people to get involved. "
Williams says in the past many people had been put off share investing because they thought it needed a lot of money.
"If we go back to why we started Sharesies in the first place, the main barriers for people investing were around needing too much money, feeling priced out of the market and also feeling branded out. What we have seen is those barriers being really worked on."
That had also coincided with houses becoming even more expensive and younger people feeling that they have been priced out of the property market.
"[It] has grown so much over last few years to the point where a lot of people are considering whether they will own a home over their lifetime and then we also see things like interest rates being low."
Many of the most popular investments on Sharesies are investment funds, rather than shares in individual companies. "That is largely because ... people choose to build up funds and then have some companies as well. It is about building a diversified portfolio."
Sharesies has a roughly even spread of male and female investors, as well as 25,000 children's accounts.
The average age of its users has risen over the past year as more older people have signed up. "We have typically had around 80 per cent of our customers under 40. But over the year we have seen that shifting and now we are around 70 per cent under 40."
That is vastly different to the typical sharemarket investor: according to surveys by the Financial Markets Authority, those investors tend to be male, over 60 and living in Auckland.
The rise of individual investors has been a global phenomenon. But it has not been without its challenges.
In December, the commission-free US trading platform Robinhood agreed to pay US$65m ($90m) to settle charges from US securities regulators that it failed to provide its customers with the best prices for trades.
It also faces allegations by Massachusetts' regulators that it exploited its customers to make bigger profits and failed to meet standards of conduct required by the state, something called the "fiduciary rule".
The regulator alleges that Robinhood used techniques to make investing seem like a game, such as showering users' screens with images of confetti, in the hope of encouraging unsophisticated customers to make more and more trades.
Then there has been the GameStop phenomenon, when individual investors seemingly banded together to buy up shares in the company - a US electronics and video game retailer - purely to drive up the stock, thwarting institutional hedge fund managers that were shorting it in the expectation that GameStop's shares would fall.
That prompted New Zealand's regulator, the Financial Markets Authority, to warn investment platforms to remind investors of the rules or face potential criminal prosecution.
Collusion and market manipulation are a big no-no when it comes to investing in publicly listed companies.
Williams says that when it came to GameStop, people were investing where they saw value or future value, or a business they wanted to support.
"I think the GameStop thing was interesting in terms of people possibly investing in that to support a cause. We tried to make sure people were going in eyes wide open ... just understanding what an investment decision is and making the decision that is right for them."
Kristen Lunman, co-founder and chief executive of the Hatch investment platform, which allows fractional ownership of US-listed shares and funds, says it does not permit day trading.
Hatch, which is owned by Kiwi Wealth, whose ultimate owner is the government, has about 110,000 members and has also seen strong growth in the past year.
Before the Covid lockdown in March last year it had 11 staff; it now has 55, and aims to grow to about 70. It has also begun a major marketing campaign with high-profile billboards for the first time.
"We have still got another tech team to put in there because we want to build out an extensive wealth platform and it's been a great year," says Lunman. "We have really benefited from this increased consciousness of investing."
She says that in the past New Zealand has lagged behind other countries when it comes to share investing.
"Of course we have had that property obsession. This perfect storm has created a fantastic thing for NZ and for the retail investor in NZ, which of course started with the early adopters."
She says those early adopters were the people who signed up before Covid hit and have been active in building their portfolios through individual share investments.
"But what we are seeing, thanks to the market crash [in March last year] is the rise in this next phase in which you move into the mainstream."
Lunman says mainstream investors largely want to put their money into index tracking funds rather than buying into individual companies.
"We are seeing this real split between this early adopter group that wants to be active and then moving into mainstream where a number of investors are just happy to be passive and just get into index funds and know money is working for them in the sharemarket."
Its early adopters have tended to be younger males, while more women are keen on index funds.
"Women tend to save more, men tend to invest more. Women learn from a young age to manage money whereas boys have been socialised to take risks and to grow their money, so I think we are still battling with that a little bit, in that there are far too many women [with their money] in savings and term deposits. So that's a big push."
Lunman says any time something big happens in the markets, Hatch sees a spike in people signing up to invest. Even the share splits by Apple and Tesla prompted a spike in investor interest, even though those moves did not change the value of the companies.
"The same thing with GameStop; while we only had a small percentage of people in GameStop, what it does is raise the consciousness of this thing called investing. While we are not seeing massive spikes, it is steady now because we are moving into the mainstream."
One thing Lunman does worry a little about, now that more mainstream investors are jumping on board, is tempering investors' expectations.
"Since Hatch launched three years ago, our investors have done extremely well - the markets over the last three years, putting aside last year's dip ... they are very happy with Hatch at the moment.
"Now we get the mass market moving in, I think it would be really good to have some tempering around expectations. The last thing we would want is for people to expect that sharemarkets continue as they have been over the last three years."
Some investors who piled into Tesla three years ago have enjoyed a 1000 per cent return on that investment. The norm, says Lunman, is more like 10 per cent a year.
"Anything above and beyond that can be a bit of an anomaly."
She knows another market crash will come. "Yes, it is guaranteed to happen."
But she doesn't believe that will result in investors fleeing the markets.
"We have done enough education and have done enough research to see what happens when the markets dip and what they do. We have got a high percentage that hold and do nothing and ... the next biggest group are those that buy more. We have got a lot of communities chatting about it.
"When you log into to Facebook and have 10,000 people in a group that are saying 'it's OK, now is the time to buy'. It might not mean you will buy, but you do think it's OK, it's a natural evolution of the market.
"I think the difference with the 80s crash, it was speculative, it was high-risk, it was bubble territory and I would suggest when I look across the average Hatch portfolio - granted, some have big investments in growth stocks - but we are talking publicly listed companies on highly regulated sharemarkets, companies have to share a huge amount of information, huge amounts of transparency, education.
"I do think between education and that community support, I just don't think we are going see ... behaviour has disproven that theory that everyone is going to flee the sharemarket."
Where Kiwis are investing:
The 10 most popular holdings by amount invested
1) Air New Zealand (NZX)
2) AMC Entertainment Holdings Inc (US)
3) a2 Milk Company (NZX)
4) Tesla Inc (US)
5) Gamestop Corporation (US)
5) Fisher & Paykel Healthcare Corporation (NZX)
6) Smartshares NZ Top 50 Fund (NZX)
7) Smartshares US 500 Fund (NZX)
8) Mainfreight (NZX)
9) Meridian Energy (NZX)
The 10 most popular by number of investors
1) Air New Zealand (NZX)
2) Tesla Inc (US)
3) Smartshares NZ Top 50 Fund (NZX)
4) a2 Milk Company (NZX)
5) Auckland International Airport (NZX)
6) Mainfreight (NZX)
7) AMC Entertainment Holdings Inc (US)
8) NZ Windfarms (NZX)
9) Smartshares US 500 Fund (NZX)
10) Apple Inc (US)
source: Sharesies data based on investment between April 6 and June 22, 2021