Kiwis are changing how they invest, with more New Zealanders putting their money to work while the way they access investments continues to evolve. We sat down with Oliver Mander, Chief Executive of the New Zealand Shareholders Association, to unpack what’s driving the shift, where Kiwi money is going and what it means for investors.
Kiwis Are Changing How They Invest
One of the biggest changes in New Zealand investing over the past decade has been the move away from directly owning shares towards KiwiSaver, managed funds and other investment options.
In 2015, 38% of New Zealand investments were held in direct shares. Today, that figure has fallen to 21%.
But that doesn’t necessarily mean Kiwis have lost interest in investing. Oliver believes Kiwis are changing how they invest largely because investing has become accessible to far more people.
Historically, investing directly in companies could feel intimidating. Oliver points to his own parents, who worked in factories and shops and would never have considered approaching a stockbroker.
Today, there are far more ways to get started. Investors can access low-cost platforms themselves or choose from a growing range of funds if they would rather not manage investments directly.
KiwiSaver has also played an important role. Oliver says it has helped improve New Zealand’s savings rate and turned many New Zealanders into investors – even if some don’t necessarily think of themselves that way.
Why Kiwis Are Changing How They Invest
Accessibility is only part of the story. Kiwis are changing how they invest because funds can also provide a relatively simple way to access diversified investments without having to research and select individual companies.
The rise of investment platforms has made direct investing easier too. Investors can now access markets with relatively small amounts of money and make investments at the click of a button.
However, being able to buy individual shares easily doesn’t necessarily make successful DIY investing easy.
Oliver argues that doing it properly requires a combination of capability, time and genuine interest. Investors need to understand what they are buying and be prepared to put in the work required to make informed decisions.
Interestingly, while direct shares have fallen from 38% to 21% as a proportion of New Zealand investments, Oliver says the amount of money held by those DIY investors hasn’t necessarily fallen. Instead, the overall investment market has expanded as more New Zealanders have gained access to different options.
That suggests the shift isn’t necessarily about DIY investors disappearing. It is about a much broader group of New Zealanders entering the investment market.
The Trade-Off Between Direct Shares and Funds
There are advantages and disadvantages to both direct investing and investing through funds.
Direct shareholders have the opportunity to engage with the companies they own. That relationship can also be valuable for businesses, which can hear directly from the people who have invested in them.
Investing through a fund changes that relationship.
Rather than companies engaging directly with individual shareholders, communication may happen through a fund or fund manager instead. Oliver says this makes it important for investors to consider whether a fund’s values align with their own and whether they have selected the right fund for their stage of life.
There is no single approach that suits everyone.
Some people will continue to be passionate DIY investors. Others may prefer funds, KiwiSaver or professional management. What matters is understanding the approach you are taking and whether it suits your circumstances.
Does Easier Investing Mean You Don’t Need Advice?
The growing number of investment platforms means New Zealanders don’t necessarily need professional advice simply to access investments.
But access and advice are two different things.
Oliver believes getting as much information as possible can be valuable regardless of where someone is in their investment journey. For investors who don’t have the confidence to make decisions themselves, professional financial advice can also play an important role.
Ultimately, there are now different options for different types of investors.
Some will have the knowledge, confidence and interest to manage their own investments. Others may prefer professional support to help them understand their options and make decisions with greater confidence.
More KiwiSaver Money Is Heading Offshore
It isn’t only the types of investments Kiwis are choosing that have changed. Where their money is invested has shifted significantly too.
Ten years ago, just over 60% of money invested through KiwiSaver was invested in New Zealand. Today, that figure is around 40%.
That change becomes particularly significant when considering how much the overall value of KiwiSaver has grown during the same period.
The trend is also appearing among DIY investors, with Oliver noting that many are increasingly focused on overseas markets.
Diversification can be a positive development for investors, but Oliver says the shift also means less capital may be available to New Zealand companies.
New Zealand represents a very small proportion of the global share market, while overseas markets offer investors access to a much wider investment universe. At the same time, Oliver argues there are New Zealand companies with strong long-term track records that can sometimes fly under the radar as investor attention shifts towards large international names.
The Challenge for New Zealand Companies
If more Kiwi capital is heading offshore, the challenge for local companies is to give investors a compelling reason to keep some of it here.
Investing locally shouldn’t simply come down to loyalty or tax considerations. New Zealand businesses need to compete for investment capital alongside companies around the world.
Oliver believes there are already local investments that have demonstrated strong long-term performance, but investor sentiment can be very different from the underlying opportunity.
There is also a broader challenge around ensuring New Zealand companies can access capital as they grow.
Oliver sees an ongoing role for New Zealand’s local exchange in connecting investors with businesses seeking capital. While it may never compete with the world’s largest exchanges, it can provide a local starting point for companies and investors while supporting the investment expertise and infrastructure that sits behind the market.
He also points to the gap between private and public markets. Raising capital privately can be relatively straightforward, while moving into a retail setting can create what he describes as a “cliff of compliance”.
Making that pathway easier could give more New Zealand businesses opportunities to access capital while creating more investment opportunities locally.
Investing Is Only Useful If You Have a Plan
Whether you invest through KiwiSaver, managed funds, direct shares or a combination of different options, there is another piece of the puzzle: knowing what the money is actually for.
Investing for the sake of accumulating more money isn’t necessarily the end goal.
Your investment decisions should connect back to what you want your money to allow you to do, both now and in the future.
That means having a clear plan behind the investments you choose and understanding how those decisions support the life you ultimately want to live.
Key Takeaways
- Direct shares have fallen from 38% of New Zealand investments in 2015 to 21% today.
- That doesn’t necessarily mean DIY investing is disappearing; more New Zealanders are gaining access to a wider range of investment options.
- KiwiSaver has helped turn more New Zealanders into investors, even if they don’t necessarily think of themselves that way.
- Investment platforms have made investing significantly more accessible, but successful DIY investing still requires time, capability and interest.
- Funds can make investing simpler, but investors should consider whether the fund and its values align with their own circumstances.
- The proportion of KiwiSaver money invested in New Zealand has fallen from just over 60% to around 40% over the past decade.
- More Kiwi investment capital is heading overseas, increasing diversification but potentially reducing the capital available to local companies.
- New Zealand companies still need to compete for investor capital by offering attractive investment opportunities.
- Whether you invest independently or seek professional advice, your investment decisions should ultimately support a clear financial plan and the life you want to live.
Next Steps
Want to take your investing knowledge a step further? Join us at the NZSA Conference in Wellington on the 22nd and 23rd of October – use code Lighthouse30 for 30% off your ticket.
If you’d like to watch more, check out this episode below.
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Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
