Learner's guide to investing

By JIM EAGLES

Our sharemarket was one of the best in the world last year ... but many local investors remain unconvinced.

Even as profits were soaring the number of New Zealanders believing shares produce the best returns slipped from 8 per cent to a mere 7.

Instead, according to the ASB Investor Confidence Survey, 22 per cent prefer rental houses and 18 per cent like bank investments.

Why is that? Why do we put less into shares than people in other developed economies?

The question matters because both investors and the economy lose if a country lacks well-performed and well-supported capital markets.

Research by the New Zealand Exchange suggests a big part of the answer is that many people simply don't understand how capital markets work or how to go about buying shares.

After all, if you want to invest in property there is a friendly estate agent just round the corner.

But if you were thinking of buying some shares what would you do?

To overcome that problem the Herald approached the exchange with a proposal aimed at making the sharemarket less inaccessible.

Coincidentally, at the same time Olympic boardsailing champion Barbara Kendall was asking friend and fellow Olympian Mark Weldon, who happens to be chief executive of the exchange, how she should go about investing in shares.

The result is a series of articles following Kendall's voyage of discovery as a novice stockmarket investor.

The exchange plans to follow up with Investor Expos in Auckland, Wellington and Christchurch.

Of course, for our capital markets to perform as they should will require a lot more than an educational programme.

It will also require tax on share investments to be put on the same footing as, say, property.

It will require brokers to become more accessible and to pay greater attention to small investors.

And it will require companies to follow the highest standards of corporate governance.

But a wider appreciation of how sharemarkets work and why they matter would be a good start.