Investors looking more at shares than property

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Kiwis expected to flock to the US sharemarket for better returns, says investment platform.

Property – for so long the "go-to" investment for New Zealanders – is enduring a new period of unpopularity while more Kiwis are buying and selling shares listed on the US sharemarket.

Co-founder and general manager of digital investing platform Hatch, Kristen Lunman, says Hatch (part of the Kiwi Group, owner of Kiwibank) has been helping Kiwis buy into US-listed shares since late 2018 – and more than 100,000 have already joined Hatch.

"The Kiwi property dream is over for most," she says. "Record high property prices have made it too hard to get onto the property ladder for many – and the final kicker came from recent changes to extend the Brightline test from 5 to 10 years for investor sales and abolish tax deductibility of interest payments. I believe this has been a key factor in increased interest in US share markets.

"Many industry experts have said doubling the Brightline test has effectively brought in a capital gains tax. Overall, property investment is no longer a smart or easy strategy to fund the Kiwi retirement dream."

Additionally, retail banks are offering record low rates of return on savings: "Term deposits are lucky to reach 1 per cent and, with inflation averaging 2 per cent a year, people are actually losing money by leaving it in a bank account."

Lunman adds that an analysis of property versus shares is revealing. In New Zealand, the median house price in 1991 was $106,000; in 2021, the median price is $826,300 – an increase of 679 per cent over 30 years. In comparison, over the last 30 years, the US sharemarket has grown 10.7 per cent a year- higher than the average annual rise in New Zealand property prices and an increase of 1047 per cent over that same 30-year period.

So Hatch has seen more Kiwis move into US shares, seeking alternative ways to grow their wealth: "New investing platforms have changed the way we invest and make it more accessible to Kiwis, regardless of how deep their pockets are. For example, on Hatch, you can invest in the world's biggest brands from just US$3 an order."

Hatch makes self-directed investing easy, she says, with helpful articles, free courses and videos to help Kiwis start growing their wealth. Those who have never invested before can check out the free online "Getting Started" course.

Hatch co-founder and General Manager, Kristen Lunman

Lunman says "Consider the companies or brands you're already familiar with. If you believe they are going to grow as a business and they do grow, the value of the share will most likely go up.

"We live in a globalised world and the US share market lists all those companies you know – from Apple to Zoom. Currently, the five most popular investments on Hatch are Tesla, Apple, Amazon, Microsoft and NIO – and we offer more than 4100 of the world's best-known companies and exchange-traded funds."

"So start with what you know, find your feet and build your portfolio slowly."

Another investment option is low fee exchange-traded funds that spread money across multiple investments in one go. That could be buying shares in a S&P 500 fund – that includes 500 of the biggest publicly listed companies in the US.

"The Vanguard S&P 500 is the most popular fund in the world and includes companies like Amazon, Tesla, Disney and Facebook," says Lunman. "So instead of investing in one company, a fund allows you to invest in many at once – spreading your money across different industries too."

Lunman says one thing that concerns some people is seeing the value of their investment portfolio at a lower value than the day before: "If you look at the US sharemarket over the past 100 years, you'll see we've had wars, pandemics, a Depression and many other events that can cause short term bumps. But, over the long term, the markets have grown much more than cash in the bank or property."

Investing in the US sharemarkets over the long term has seen higher growth than property, but it's not a short-term, get-rich-quick scheme, she says.

"The share markets are for people looking to grow their money for 10, 20 or 30+ year goals. Take a breath and ride it out over a number of years - you have to manage your emotions through the bumps."

Hatch has straightforward pricing and no ongoing monthly subscription fees: "The trend we are seeing is investors wanting a user friendly platform and steering away from paying human brokers to do it for them," says Lunman. "Hatch makes the buying and selling of shares very easy."