There are many different ways to invest your money. Check out our beginner’s guide to common investment options in New Zealand.
Investing is a great way to build wealth over time. When weighing up the suitability of different types of investments, there's a lot consider. Your timeline, experience, the economic climate and your appetite for risk all influence what you invest in, and the success of your investments.
Below we share a beginner’s guide to common investment options in New Zealand. If you’re interested in investing in some of the options listed, remember to get personalised financial advice first!
Shares
When investing in shares (or the stock market), you're purchasing a portion of a company or a group of assets. Share prices fluctuate regularly, which means they can be a volatile investment option over the short term and potentially long-term.
The great thing about investing in shares is the low barrier to entry. Whether it’s $100, $1,000 or $10,000, anyone can invest their money in shares.
Managed funds and Exchange-Traded Funds (ETFs)
Managed funds and ETFs offer easy diversification and spreads the risk of your investments, making you less vulnerable to the whims of the market.
The main difference between managed funds and ETFs is that the shares in an ETF are listed on an exchange and so their value changes throughout the day, unlike managed funds which are valued once a day. Here’s a comparison of the two:
| Managed fund | EFT's | |
| What is it? | An investment fund that pools your money in with other investors to buy stocks and bonds. | Instead of buying individual shares, a fund will purchase a diverse selection of shares in a bundle. |
| What are the risks? | Like any share investment, the value of your investment may drop if the value of the stocks or bonds drop. | Market trends, currency and interest rates, and liquidity may increase the risk of your investment. |
| How much will it cost you? | One-off establishment fees and fund management fees vary between different fund providers. | Expenses associated with the day-to-day running, and brokerage fees charged by your fund manager. |
Term deposits
A term deposit is a fixed term investment with a set interest rate, offered by banks and other financial institutions. Term deposits are considered low risk investments; however, they deliver relatively low returns.
One of the benefits of a term deposit is guaranteed, regular returns. You also know exactly how long the term of your investment is and the interest rate, making it easier to plan your finances. If you would like to exit the term deposit before the agreed upon exit date, there may be early withdrawal fees that could affect your returns.
Bonds
Bonds are issued by government bodies, councils, or companies to raise capital (money). Put differently, when you invest in a bond you are lending your money to one of these bodies, and you’ll receive periodic interest payments back at a set interest rate in return. When the bond expires, your money is repaid in full.
Bonds usually offer higher interest rates than bank deposits. While bonds are considered a relatively safe investment option, they still carry risks. Inflation, interest rates and the liquidity of the company you’ve invested in can all pose a risk to your investment.
Bonds can be purchased from bond markets, such as NZX Debt Market or through a sharebroker. If you are already investing in shares via a managed fund, you may also notice that they offer bonds.
KiwiSaver
KiwiSaver is a voluntary savings scheme for New Zealand citizens for their retirement.
Like managed funds, your money is managed by a KiwiSaver provider who invests your money in one of their funds so that you get a greater return on your investment.
You choose your KiwiSaver provider, and what kind of fund you want to invest in (low risk, medium and high growth).
For more information about making the most of your KiwiSaver, check out our recent blog here.
Peer-to-peer investing
Peer to peer investing is where an individual investor invests directly into a loan without an intermediary, such as the bank. Instead, they invest via peer-to-peer websites or platforms. Investors enjoy regular, enhanced returns with the loan paid in full at the end of the investment term.
There are some providers, such as Southern Cross Partners (SCP), that invest their own capital first, before offering loans to investors.
For more information on peer-to-peer lending in New Zealand, visit our recent blog here.
Property
Property investment in New Zealand has historically yielded strong returns and is a great hedge against inflation.
While buying a property is still a popular investment option in New Zealand, despite its track record there are downsides to this type of investment too. From high interest rates to tenancy management and governmental policies, there’s a range of external factors that can impact property investments.
Investing in property via peer-to-peer lending providers, such as SCP, is a great way to invest with property without having to own a property. This property investment pathway decreases the risks associated with high inflation rates, offers shorter loan terms, and delivers regular, enhanced returns.
SCP is New Zealand’s largest a property backed peer-to-peer lender, and our friendly team would be happy to help explain what SCP all is about. Visit Investments - Southern Cross Partners for more information.
Careful evaluation of your goals and risk appetite is essential for successful investing. By understanding your strategy and diversifying your portfolio, you could enhance your potential for long-term wealth growth. Making informed decisions is key to navigating the investment landscape effectively.
Southern Cross Partners is licenced to provide peer to peer lender lending services under the Financial Markets Conduct Act 2013. This article is general in nature only and has not taken into account any particular person’s objectives or circumstances. We recommend you speak with a financial adviser before making any investment decisions.
