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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I’ve had a decent break from this site as I try to work through my thoughts. Then again- work life has been very exhausting in recent months. As such- I haven’t had much time (motivation) to sit down and write posts. So this is going to be a short update on some of the new developments that have been happened in New Zealand’s Investing world.
InvestNow’s KiwiSaver Scheme
InvestNow has been hinting about their move into offering a Kiwisaver scheme for some time now. And it’s finally here. I have been waiting to see what they were going to offer. I’d anticipated that it would be similar to Superlifes scheme- where you can individually choose the allocation amount to different funds. But, InvestNow has the advantage of having funds from many different fund providers- whereas Superlife only has its own funds.
Currently- the InvestNow Kiwisaver schemer has three diversified funds to select from- but I have it on good authority that in the next few weeks 28 funds will be added. This will give you the ability to build your own KiwiSaver portfolio that meets your specific needs using a combination of fund from different managers. Allowing you to tailor your Kiwisaver between active and passive funds, access responsible investing funds, and set the level of diversification you want.
I will be writing a review once the other funds have been added.
Sharesies Offers US Shares
In August- Sharesies started to offer members access to over 3000 shares and ETFs. They are using the same platform as Hatch to give you access to the US market. Using either platform you will need to exchange NZ dollar to US dollars. Sharesies has a 0.4% exchange fee, while Hatch has a 0.5% fee.
Sharesies has a transaction fee for all orders of 0.5% for the first $3000, and 0.1% for any amount above that. Hatch also has a $3USD fee for 0 to 300 shares and $0.01 USD a share above that. So it becomes very complicated to work out which one is cheaper. It really depends on the situation. I did a few calculations below assuming a 0.67 NZ to USD exchange rate to show this.
A word of caution with sharesies is that if your balance is small- the membership fee is quite steep. Between $50 to $3000 the membership fee is $1.50 a month, or $18 a year. On a $50 balance that equates to a 36% in fee, decreasing to 0.6% once you are near $3000 invested- which isn’t too bad.
Once over $3000 the fee increases to $30 per year. So the more you increase your balance the less you pay. Which is great if you have a lot invested. But- if you had $3000 and you’re going to use Sharesies to invest in US and NZ funds- you will have to add on the fund fee on top of that. So if you have $3000 invested in the US500 fund you will be paying an effective fee of 1.34% for a fund that normally only has a 0.34% fee on the likes of InvestNow. That’s quite high.
Bonus Bonds are Dead
ANZ has announced that it is going to wind up the bonus bond scheme in October. ANZ says it’s stopping the scheme because of low-interest rates are reducing the prize pool over time. In my recent post- Are bonus bonds better than Lotto?– I showed a graph of the size of the bonus bonds prize pool decreasing over time.
Bonus bonds have been around for more than 50 years. And I have always disliked the way they used the slogan “the much more fund investment” as I don’t class them as an investment vehicle. Never the less- I have had some bonus bonds for many years as a way to offset spending on lotto- It’s not a logical choice as a clinical investor- but we are all human.
Now I need to decide what to do with my bonus bonds- Do I withdraw them early, or leave them for the October prize draw- in which case I may not see the money for another year. Do I add them to my emergency fund? Invest them with Kernel? Spend them?
Let me know in the comments if you have any bonus bonds and what you are choosing to do with them?
Investment Update
It’s been remarkable how quickly the markets have recovered from the initial fall in March. Even more, remarkable is how the markets are performing right now- with the NZX50 hitting an all-time high in August.
There has been a lot of talk as to why the market has recovered so much given the state of the world. People are losing their jobs, businesses are struggling and in some cases closing. Yet the market keeps going up, while the economy keeps getting worse.
The one thing I would say is that the market does not reflect the economy perfectly- and that could be the reason why it’s not following the same trend. Take the NZX50 for example– it contains the 50 biggest companies in New Zealand. One of the biggest companies in the NZX50 is Fisher and Paykel healthcare. Currently, they are experiencing huge demand for their products and have gone up nearly 100% over the last year.
Similarly in the US500- the biggest companies are mainly tech companies like Apple, Microsoft, Amazon, Facebook and Google. We are all spending more time at home using technology to stream entertainment, ordering products online, and keeping in contact with friends and family via skype, zoom and Facebook. So it makes sense that they are doing alright too.
What is not represented in these market indices are the smaller mom and pa businesses that are struggling right now. So in some ways, I think the market is positively affected by COVID, while the economy as a whole is more negatively affected.
Others are pointing to retail investors using products like Sharesies and Hatch ( and Robinhood in the US) for propping up the share market. Both through the gamification of share investing and novice investors try to buy the dip. I’m not as convinced about this argument but it might be having some effect.
Either way- my portfolio has been growing quite nicely over the last few months. It’s possibly too early to tell but I am happy that I did not panic and just left my investments to do what they are supposed to do.
But, over the last few weeks, I have been re-evaluating my goals, both in life and with my finance. Recent world events have made me think a little differently about my situation and how I am going to move forward. This may or may not change my attitude towards my investing in the future. It’s all a balance- and it’s about getting that balance right. I’m not sure I have the balance quite right at the moment. Although I am still regularly investing to get the benefits of dollar-cost averaging during this volatile time.
Short update this time- In the next few weeks I hope to finish a few more posts. There are currently 28 drafts posts on the go.
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Personally i’d sell cash out bonus bonds and put them to work elsewhere which is what I did some time ago. That said if its a low amount, no harm in leaving it to see if you win in the last draw. The real winners with bonus bonds are ANZ based on the fees they charged to manage bonus bonds.
You are probably correct- I should have cashed out a long time ago- although I considered them as part of my emergency fund. Now they are saying that if you leave them- they may not be released for up to a year after the final draw as they wind the scheme up.
Started my Share Buying” journey April 2020..using both Hatch and Sharesies platforms. Equal amounts of cash into both on a monthly basis….Now wish to move all my US stocks from Sharesies to Hatch and are informed that they will all have to be cashed up and into NZD and back into my bank account transferred to Hatch and then changed into USD again and then re bought again….Not a good situation!!!. Yet Hatch and Sharesies both use the same US broker. Any ideas?
Hey Christopher, I’ve emailed Hatch and this is what they said. “Sharesies don’t currently offer US share transfers due to how the shares are purchased through a custodial account. Due to broker requirements and AML concerns, they’re unlikely to process a share transfer between accounts unless both accounts are in the same name of the customer. Unfortunately,this does mean that there is no easy way to transfer from Sharesies to Hatch as you can between Hatch and other platforms (e.g., Stake).”
Might pay to email Hatch and ask. Sorry that I could not help.