Welcome to Passive Income NZ, my Journey to Financial Independence. Every month I share how I am tracking towards financial freedom by providing you with an update of where my portfolio is at and how far I am from financial freedom, and how my spending is tracking. My definition of financial freedom is not really the same as everyone definition. It’s not to just stop working, it is much more than that. It’s about living a more intentional life.
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Over the years, I have signed up to a number of newsletters from several of the NZ investment platforms including lunch money from Sharesies, a weekly email from Hatch, a monthly email from Pie funds and Juno, and the monthly InvestNow magazine. So there is quite a lot of information flooding into my inbox- the result of this is that I generally only skim read the emails.
Although skim-reading emails may be time efficient- skim reading is also very prone to bias. Specifically, confirmation bias. Confirmation bias is where you seek out information that backs your pre-existing views. I am biased towards believing that passive beats active in terms of investing. So the article by Invest now, The Active/Passive Divide- on the other side– caught my eye.
Some interesting points- InvestNow investor data shows that 9 of the 10 most popular funds on the platform are index-based. And, that a third of all InvestNow members have invested into the Vanguard International Shares Index fund. While another quarter have invested into the Smartshares NZ Top 50. All of which I thought was quite interesting.
I know I have these biases to seek out information that aligns to my beliefs. And because I know that, it does pay to seek out information that goes against your believes and really absorbed the arguments, facts, and data. Keeping your mind open to the possibility that your prior believes may be wrong.
May is an expensive month. It’s the month when all our insurances renew. We tend to pay annually- as paying the premium annually is generally cheaper than paying monthly- with the exception of Cove’s car insurance. The annual payments come out of our expenses account for which we transfer money into each paycheck. This covers our rates which come every six months, insurance, power and water rates.
I didn’t switch insurance providers this year as I couldn’t beat the current premiums on the renewals. So we are sticking with AMI for home contents and one of the cars while using Cove for the second car. Sneaking plug here- you can get one-month free car insurance if you use this Cove link.
May is also the time of year we need to refinance our mortgage. Mortgage rates have been extremely competitive in the last few months, and they keep coming down. for that reason, we only fixed for 1 year with our current bank BNZ. We could have tried to negotiate with another bank to get a better rate- but we were only looking at 5 bases point difference in most cases. That and when I changed banks from ANZ to BNZ 2 years ago and received a cash bonus- I agreed to stick with BNZ for 4 years. If I change before that I could be liable to pay back a proportion of the money.
But rest assured- in 2 years time, if I am not happy with BNZ I will change on a dime. There is no point in being loyal to your bank if you can get a better deal elsewhere.
Supporting Local Business
I’ve been trying to make a conscious effort to support small local business around town. And in the future- we hope to take a small break around NZ somewhere- since our holiday was cut short. I’m are not sure where to go right now- so if you have any ideas- I’d love to hear them in the comments. So far I’m thinking the far north- or the deep south.
With the increase in AMP NZ share index fund fees, I’ve been looking into other investment options for my NZ proportion of my fortnightly investments. For now, I have stopped my automatic investment into the AMP fund on InvestNow while I think through my options. I think there are three options available to me;
- status quo- AMP NZ Share Index fund with a 0.33% annual fee and 0.44% buy-sell fee
- Smartshares NZX 50 fund with a 0.50% annual fee
- Kernel Wealth NZ 20 fund with a 0.39% fee, dropping to 0.29% once you hit $25K
I’ve already one the numbers and the fee structure for AMP beats Smartshares after 5 years for a single one-off investment, and around 10 years for regular contributions when you consider no returns. I’ve yet to run the numbers on the Kernel fund. But I have signed up to Kernel to check out their user interface.
The rest of my investments are the same as last month- and I don’t plan on selling my AMP NZ share funds at the moment as they still have a low annual management fee of 0.33%.
- Vanguard International Shares Select Exclusions Index Fund
- Vanguard Intl Shares Select Exclusions Index Fund – NZD Hedged
- AMP Capital NZ Shares Index Fund
- AMP Capital Australasian Property Index Fund
- AMP Capital All Country Global Shares Index Fund
- Smartshares – US 500 Fund (NS) (USF)
InvestNow has finally released their tax summary for the year- so I will be doing my FIF taxes soon. I think I might update my original post on FIF to make it clearer. It’s still one of my highest read articles- so there must be a significant number of people wanting to understand the FIF system, especially now with Hatch and Stake in the NZ market.
- Australasian Shares: 22% (+1%)
- International Shares: 39%
- US shares: 3% (-1%)
- Total Shares: 64%
- Kiwisaver: 13% (+1%)
- Peer to Peer Lending: 7%
- Listed Property: 15%
- Bonds: 0%
- Cash: 1%
The big drops in returns that I saw in March have decreased somewhat in April- with many of my investment returns back in the green. Although I expect to see some more turbulence in the coming months.
- InvestNow: 3.59% (+6.27)
- Genesis Energy: -2.09% (+1.32)
- Kiwisaver: -4.91% (+6.03)
- Lending Crowd: 11.44% (-0.02)
- Harmoney: 10.31%
InvestNow: Returns from assets I hold are after fees and before tax for the last 12 months. Genesis Energy: Returns from capital gain and dividends in the last year. Calculated using Sharesight. Kiwisaver: Performance for the last year after fees and after-tax and membership fees. Lending Crowd: Net average return (NAR) is a calculated annualised return for your investment portfolio that’s calculated monthly on the 1st day of each month. Harmoney: Realised Annual Return (RAR) is a measure of the actual rate of return on funds invested in the Harmoney platform.
It’s been a wild ride over the last few months. February was a record loss month, then March topped that loss and then some. And in April, I had a record gain, which saw my investments hit 100k again. Then May was another record month of gains. I guess that is why you shouldn’t monitor your investments this often.
That’s it for May. What do you think? Where should we travel to around NZ?
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