Avalon’s Money Thread: Can I Invest In new Zealand?
Filed under: Avalon's Money Thread, Property & General Investing, Retirement, Pensions and Kiwisaver
This is an area that I’ve personally experienced a big difference in from being in the UK. I’ve honestly been bowled over by the sheer opportunity available here to invest in our future. This is usually outside what I guess would be considered normal in the UK. Many more people “do their own thing” rather than relying on a “pension scheme”.
The main principle of investing for a future is:
PAY YOURSELF FIRST
or
SAVE FIRST – SPEND SECOND.
The aim is to set aside 10% of your income for your future. (Add that to your budget!)
Investing and wealth creation are huge industries here. And something I found amazing was the number of free seminars available. I think you should always be careful about seminars if anyone is pushy and asking you to sign up for an expensive course, walk out. Not that it’s always a bad course but you should “never sign anything” without sleeping on it first! Some seminars you need to pay for but still be wary. If you are the sort of person who easily gets signed up for stuff, don’t go. Or at least don’t take your credit card or you may end up with that much-hated timeshare in Lanzarote! (Which let’s face it – is not going to be a whole lot of help to you once you are in New Zealand.)
Company pensions are available but most companies will not pay contributions into them because they have to pay Fringe Benefit Tax to the government in order to do so. Also, any contributions you make are done after you have paid income tax on the money earned. So you do not even get that tax benefit. Kiwisaver is a new(ish) Superannoutaion scheme which you join automatically when starting a new job, and have to opt out of if you do not wish to be a member.
About the only benefit is that when you finally do take the pension out you aren’t taxed on the income.
A lot of Kiwis seem to go it alone with investment planning and do it with residential property. Property is big; shares not so much as people got badly burned in 1987 and won’t look again. Besides there are nice tax advantages (at the moment) to buying property and holding on to while renting it out. If you want to buy property and “do it up” a la Property Ladder you will get taxed on the profit but if you “buy and hold” you don’t get Capital Gains tax! (Yet)
If you want to get into investing in property, the best place to go is a forum called Property Talk because there’s just too much info and they are active investors.
Do be aware that most people “negative gear” property, which means they make a loss week to week. (We are in this position). This is because the Government pays you some of that money back if you are a taxpayer. But you do need to have spare cash to “prop up” a property if you are going to do this, and it does limit how many properties you can buy.
I will be looking at property for this year but I also invest in shares now. I do this by buying Direct Shares rather than what most people do which is to pay money each month into a Managed Fund. The difference is that I save up $5000 at a time and then decide on a company to invest in, and buy shares in that company. Whereas with a managed fund, I would put say $500 a month into a fund, and then the fund manager takes all the other $500 that everyone else paid in that month, and he picks a load of shares to buy with all that money (having taken some of the money out for fees). I read somewhere recently that if you throw darts at a list of shares you would probably pick just as well as the fund managers do!
Is it risky?
Well yeah, to a point. But I work with a company that advises me on which shares to buy and they use a method called Value Investing. This means ignoring the share price. Most people buy shares because they are “popular” and this means the price is higher. Value Investing means looking at the company and deciding what the company is worth. Then buying shares in that company when the share price is lower than it should be. Basically it’s buying shares at a sale price. It does require education, but then to be honest I’m now a firm believer in the fact that if you want a good financial future, you have to get educated about money. I find it odd that we are not allowed to drive a car without some education but we are allowed credit cards and allowed to invest without it!
We work with a company called Wise Planning But I strongly suggest that if you want to look at this, go to an evening seminar first. The program we did was expensive and you really need to work hard at it and I wouldn’t recommend it for everyone. Be assured that the one thing Wise Planning wont do is any Hard Sell which strangely is exactly why I joined them, so you can be sure your credit card is safe and you won’t end up with said timeshare in Lanzerote!
(Update: Wise Planning hiked thier fees up by a ridiculaous amount, and I now wouldnt recommend them, as the owner of the company was actually quite snotty and rude to us when we objected to a 100% fee hike with no warning. but if the Introductory seminar is still free – then it’s worth going to.)
The main thing that makes investing risky is ignorance. If you don’t understand what you are doing and the exact risks involved, you shouldn’t do it. There has to be an amount of personal responsibility taken for your future so if this is all gobbledygook, then read some and understand it.
Update: We headed firmly aware from share investing and into property, which for me was much more fun, much more interesting, and easier to understand. Ive made a lot of friends along the way, and learned huge amounts, not just about investing. Its worth joining a local Property Investors Association if you want to go to into this – they hold monthly meetings were you can network and learn.
Whatever you do, if you want to invest – make sure you get some advice. A lot of people have lost an awful lot of money in the last few years, and while no amount of knowledge or advice could have stopped all the problems, many people have lost everything because they just “invested” in something without understanding what they were doing or what they were signing.
Avalon’s Money Thread is a series of posts which were originally written in 2007 for an Immigration Forum. They came about by answering questions that forum members asked, about how to cope with the often difficult financial situation they face in New Zealand. They formed the basis of what was eventually to become the book Avalon’s Guide: after another year or so of drinking way too much coffee and finding out way more about taxes, money and investing that any sane person should.
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Related posts:
- Avalon’s Money Thread: Buying Houses in New Zealand.
- Avalon’s Money Thread: What’s all this BBO & BEO nonsence on house adverts?
- Avalon’s Money Thread: Working out our net worth.
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