Hatch has been around for a while now (2018) so I figured I’d dig around and learn a bit about it- otherwise, I might end up stuck in my InvestNow bubble forever.
I’ve always been drawn to investing in individual companies. It seems like an exciting prospect. But I have never bothered with it because of the costs associated with trading individual companies were too high. Hatch aims to change that.
Now, what’s left stopping me from investing in individual companies through Hatch? Time! Doing all the due diligence on individual companies. But if you have the time to do your own due diligence and are comfortable making decisions on individual companies and are aware of your biases, then Hatch is something for you.
Who and What is Hatch?
Hatch was launched by KiwiWealth in 2018, which is the sister company of kiwi bank. That makes it 100% locally owned.
Hatch makes it easy to invest directly into companies listed on both the Nasdaq and New York stock exchange. That means you can have access to more than 3000 companies.
Hatch is a financial platform and does not offer you any further advice then the general guidance on tax. If you are wanting to invest in the US share market you are going to have to do your own research. Hatch is a tool that lets you have access to the shares.
How does Hatch work?
Hatch works similar to other online investment platforms offered in New Zealand.
First, you need to sign up and verify your identity using either your NZ driver’s licence or passport. You need to provide a bank statement to verify your bank account. You need to be at least 18 years old. They claim the signup process will only take 3 minutes.
Once Hatch has verified all your details then you can start to deposit money into your hatch account. You can deposit money directly from any New Zealand bank using online banking, and once Hatch receives it, it’s automatically converted to USD. Hatch does not hold any NZD.
Then once your money has been cleared and converted to UDS you can start investing. They have access to over 2900 companies and more than 500 exchange-traded funds. This includes many Vanguard passive index funds, and iShares passive index funds, both at very low fees starting at just 0.03%
There is no minimum you need to invest. Since you are investing in the US you need to take into account that the US share market is open between 9:30 am to 4 pm, which is between 1:30 am – 8 am NZ time in summer and 3:30 am – 10 am in winter. So if you place an order when the market is closed, your order will be processed once the market opens up again.
When you place an order for shares, Hatch estimates how many shares you’ll get for how much you want to invest. If the share price changes before your order are completed, the number of shares you end up with might be different than your order. For this reason, having a buffer balance to avoid a rejected purchase if the price and quantity of shares exceed the money available.
Any money that you don’t invest with will earn interest in a low-risk cash deposit offering a return of around 1%. And any dividends that you receive can either be paid back into your account in USD.
How do Hatch Make their Money
Obviously, Hatch, like every other investment service needs to make money. So how do they make their money? Hatch makes there money in fees in 3 different way.
- Trade fees.
- 0-300 shares: $3USD. To buy or sell a fraction of one share, up to 300 shares: $3 USD
- 300+ shares: 0.01 USD per share. So up until you buy 300 shares, you’ll be paying a flat rate of $3 USD on every share order.
- Currency Exchange fees. Hatch charges a currency exchange fee when you change your money from NZ dollars to US dollars at a rate of 0.5%. So for every $1000 you invest, and if 1 NZD = 0.67 USD, you will end up getting an exchange rate of 1 NZD = 0.6666 USD, so you end up paying $3.4USD. ($670USD – $666.6USD)
- Tax filing fees – When you make your first deposit in hatch there is a one-off $1.50 USD fee to cover the cost of processing compulsory US tax form. Then there is an annual $0.50 USD fee to cover the cost of processing your annual US tax return.
Hatch’s main competitors are the share brokerage’s divisions of some of the major Australian banks- mainly ASB and ANZ securities. Hatch blows the competition out of the water in terms of fees.
- ASB Securities – US share have a trade fee of 0.80% with a minimum of $50USD, on top of that there is an agency fee of 0.4% with a minimum of US$40 per trade for orders up to US$50,000. The currency exchange fees are around 1.50%
- ANZ Securities – US share have a trades fee of 0.6% or US$69.50 brokerage fee whichever is greater, and there is a US$500 minimum order. The currency exchange fees are around 1.50%
I think Hatch is best suited for anyone that wants to invest directly into the US markets that are not commonly available to Kiwis through other platforms such as InvestNow and sharsies. And maybe other markets if Hatch ever decides to offer them.
You will need to do your own research. There are many companies on the platform and I was quickly overwhelmed. There where many companies I know about like Telsa, Apple, Amazon, Facebook, and Netflix. But there are many others that I have never heard about.
I don’t think that Hatch is well suited for Passive Investors who don’t want to go through all the due diligence. And it’s not well suited for people without a lot of capital as the fees can be quite large when working with small amounts of capital.
If you have the time and capital to invest in individual US companies, then Hatch is an easy choice of which investment platform you should use.
Either way, the launch of Hatch has been great for New Zealand investors. Giving us more choice and competition which over time will help the New Zealand investing scene become more innovative and drive fees down.