New Zealanders Hate the Sharemarket

These are eight quotes from real people about the sharemarket in New Zealand.

1) Shares are so risky – only invest what you are prepared to lose.

2) Balanced funds are a mix of shares (risk factor applies) and the management fees will cut into the profit margin. Govt bonds or fixed term deposits are cheaper options for many.

3) Basically there is NO perfect investment. In times of low interest rates, such as now, high returns are not possible unless you are prepared to risk losing your money. Shares are never a good investment for those nearing or at retirement.

4) 1987 crash cost me $62000 & the signs are there again, inflated housing prices, greedy banks, for sure I will take my Bank guaranteed interest and cant get wiped out as here(Aus) Banks are Govt backed and guaranteed.

5) The shares I bought years ago in local companies are now practically worthless. I’d like to get rid of them except it would probably cost me more in fees than I’d get back.

6) Over the years I have tried Shares, Managed funds and property but I have found that those managing the money look after themselves first and the investor second and trying to manage tenants is a nightmare. It is the investor who take all the risks. I have lost money on both shares and managed funds while those managing my money have lost nothing, so now stick to term investments with the trading Banks. Although I receive a pittance of a return, at the end of the day I can sleep at night.

7) Stockmarket is being propped up by cheap money, this doesn’t even include the money Japan is printing. The FED is pumping 85 billion a month into the financial system, kiwisaver also pushes peoples retirement funds into the stock market propping it up further. Amercan 401K’s, more stockmarket propping… This is unsustainable… I give it two to three years at most. Massive crash coming.

8) I believe foreign exchange markets are corrupt on a scale that you and I (the average kiwi) could not comprehend. NZ is a tiny blip on the radar screen of huge foreign exchanges that deal in trillions of dollars. It wouldn’t be the first time corrupt trader/s have taken the system to the brink. I would never put a single cent of my money in the stock exchange … EVER

with time we can learn to forgive the sharemarket

The 1987 crash left a huge impression on several generations of New Zealanders. Quote number one was even passed down to me by my parents and I’m barely old enough to remember 1987. I thought the sharemarket was equivalent to gambling!

It was a bad time for a lot of people, retirement savings were wiped out, people had to sell their homes. There is still a lot of deep pain and fear towards “the sharemarket” as if it were an evil entity in itself.

Just today a coworker told me that you should only use money you can afford to lose in the sharemarket. I then pointed out that 90% of her retirement savings is invested in shares via Kiwisaver. New Zealand retirement providers have not done a great job of communicating exactly what their products are to the general public. Even worse she believed those retirement savings were guaranteed by the government.  Oh dear. Kiwisaver providers, please try harder.

Sure, it can be risky if you buy stocks based on a tip from a random Uber driver whose brother just happens to work in finance, but there are ways to invest in a diversified less risky way. There’s no need to risk everything on a handful of stocks. I use index funds to gain exposure to a wide range of companies operating in different markets. Its pretty unlikely that hundreds of companies in different parts of the world will all go bankrupt.

I still hold a handful of single company shares because its fun and exciting but I’m investing in index funds for the foreseeable future. After all, owning shares is just owning a business without the hassle of having to run it.

 

October Dividends and a Hostile Takeover

So all the dividends have finally reached my bank account and anything not set up for automatic dividend re-investment has been combined with some cash in my brokerage account and invested back into the MDZ index fund.

Single Stocks
Michael Hill $48.06
Meridian energy $149.20
Auckland airport $15.16
PGG Wrightson $56.95
Mercury Energy $88.88
Metlife care $8.15
Abano healthcare $24.27

Index funds (Smartshares)
MDZ $135.15
MZY $29.55
DIV $55.00

Total $665.37 (After tax has been paid!)

I love dividends, I love them soo much. It really feels like the only true passive income, I don’t have to do anything as long as the company does well I do well. Passive income is a magical thing and is an essential part of any financial independence or early retirement plan. I finally have money that is making me more money. You can read about how to buy shares and get started investing in the New Zealand share market in my previous post “So you want to buy some shares……”

Total Dividends for 2016 $1037.17

I’m pretty pleased with the dividends this year and its after tax too! Making a grand for doing nothing is a sweet deal. It doesn’t even seem real. It certainly makes up for the mild melancholy that takes over when the market is going into bear mode. I’ve stopped checking my portfolio on my breaks at work, I was obsessing and its better that I just chill and keep to the plan. $500 a month, every month invested into index funds. I’m keeping it simple from now on, no more single stock purchases!

The New Zealand Share market has been on a downward trend for the last few months, but I had one little bright spark. Abano healthcare become the subject of a hostile takeover on Friday afternoon and the share price jumped from $7.60 to $9.00 in less than an hour. It was pretty exciting to watch and word is they are paying $10 a share to try acquire 50.1% of the company. I’m not really sure what that means for a little minor shareholder like me, lets just say no one’s calling me on the phone to try buy my shares just yet, but it was quite a fun afternoon for an amateur investor.

 

The $ide effects of Fasting

I’ve been experimenting with fasting lately. For 2 reasons.

  1. My life is filled with excesses, food, entertainment, luxury, beverages, comfort. Fasting for a day is a good mental exercise in appreciation for all you have and it exercises mental discipline. Even though I’ve felt broke at points in my life I’ve never experienced scarcity of food or true hunger.
  2. I’m overweight and have a family history of type II diabetes. There is research to suggest regular fasting can help improve insulin sensitivity.

    Fasting has FIRE upsides!

    One side effect of regular fasting is the money you save. It’s one whole day a week where you don’t have to buy any food. I also don’t drink any beer or wine. No cooking means less power used in the kitchen. I also don’t particularly feel like being around food so I avoid doing any shopping or being anywhere near shops on my fasting day.

    I like to keep myself distracted from the lust for food so I’m often really productive on my fasting days, but usually in low key activities like doing the accounts, writing or doing a coding tutorial on the internet.

    I’ve noticed too that planning and thinking about meals actually takes a whole lot of mental energy. On fasting days I feel really free because I don’t have the hassle of organising meals.

    When fasting, drink lots of water
    mmmmmmmm Water, or as I call it……Dinner

Fasting may seem a little extreme. I see it as having a bit in common with FIRE philosophies. A little sacrifice for better health is just like saving now for future wealth. I deny myself fancy cars because I know it would be bad for my financial goals and I’ll deny myself dinner once a week because I know its doing wonders for my insulin sensitivity.

Fasting is seen as a bit fringe in my social circle, so is the idea of retiring early. Both ideas are going a little against the norm. I don’t tell my coworkers I’m fasting and I don’t talk about my plans to retire early. It does seem that most of the “retire early” crowd I read about online have really open minds and are keen experimenters. I like to think I’m open to new ideas too, It’s why I didn’t go “Retire early? That’s impossible” when I first read about the concept. So I’ll continue with the weekly fast and the weekly savings, short term sacrifices for long term gains.

What’s it like switching Kiwisaver providers?

Have you ever moved your retirement savings? I recently switched to new kiwisaver provider Simplicity and here’s how it went.

Contemplation

I first started thinking about switching kiwisaver providers when I wrote this post about kiwisaver fees. New Zealanders don’t have many options for super low fee retirement funds. My current provider Kiwiwealth while very open and transparent still charged 1.17% in fees. This is (shockingly) below average. Many providers are charging a lot more than this!

Last month a new kiwisaver provider started showing up in the local newspapers. Simplicity claimed very low fees of 0.31%, they are owned by a charitable trust and a 1/3 of their management fees are donated to charity. Its an easy sell, sounds great on paper. Oh and they mostly use index funds, so nice and diverse.

Simplicity Kiwisaver provider

The Switch

I was intrigued, a low fee fund finally on offer in New Zealand! After reading a bit more information on their website (including the product disclosure statement) I boldly decided to make the switch. Simplicity makes it easy to switch, you have to provide your IRD number and upload some identification (scanned my passport). Painless and after that it’s all in their capable hands. Like all good decisions it was made on a Sunday afternoon. I’d been with Kiwiwealth since I first joined kiwisaver, leaving was hard, for the most part they were pretty good but in the last year my balance had flat-lined. I also learned that they don’t invest in New Zealand shares at all. Which didn’t sit well with me and maybe that’s not very rational, but I like to think we have a few companies here in New Zealand doing exciting things. Show a little faith in your home economy!



 

Patience and Denial

The days dragged on, I paced, I checked my emails constantly. I logged into my old provider most days to see if the balance had been transferred. I got a reassuring email from Simplicity letting me know that yes things are happening but it might take some time, apparently your old provider has 35 days to transfer the funds! That’s working days, so its 7 weeks to get their arses into gear.  Finally on day 13 something actually happened, I was LOCKED OUT of my Kiwiwealth account. Now I know my money is (likely) no longer with them and I’m no longer a client but it seems just a little passive aggressive to delete my login credentials. There wasn’t a “Sorry to see you go email” or even a plea for me to stay. No communication, apparently I’m dead to them now.

What the hell

At lunchtime on working day 15 I got notification from the IRD that they will be forwarding money from my paycheque to Simplicity, yay things are moving along. Meantime no idea where my money is. For 2 days my money has been in the ether, drifting. How do they transfer it anyway? Send a check, money order, bank transfer? Its a mystery.

Resolution

Anyway I got home after work and there was a letter from Kiwiwealth, finally communication! It was a statement of my accounts letting me know how much money would be moving over to Simplicity and that they were sorry to see me go. Thanks guys, I was really hurt when you locked me out. I missed the chance to down load my historical info and how can I geek out on my savings numbers now? Thankfully I had loaded some annual info into a spreadsheet so I can make graphs to my hearts content.

Later in the evening I got an email from Simplicity announcing that my account was active! I logged in and all my cash was there. They did let me know that the deductions from my paycheck were not occurring just yet, but I had the notification from IRD so I know its in the process of being sorted out.

So overall not too painful, 3 weeks of limbo and then bam, all done. Although they legally could take up to 35 days it only took 15, so not super speedy but not terrible either.

 

September Spending

Graph of September Spending

Ah September, I attempted to be more mindful in my spending and reduced the grocery spend considerably. However beer expenses were up up up!

What I do like about looking at the graph is that our expenses after mortgage and savings are roughly a third of total expenditure. So once the house is paid off we’ll be able to really ramp up investing and our retirement expenses probably aren’t going to be as high as we think.

The Good

I managed to save a bit more money this month, I transferred money out of my checking account most days into my savings so I wasn’t tempted to spend it. Grocery expenses were down helped by more careful spending and a $100 voucher I got in exchange for taking part in a nutritional study.

The Bad

Spending money category or I may as well call it, the beer category. I bought a delicious amount of beer. Not only for drinking at home but I also went to my favourite bar’s 3rd birthday celebrations (free food and lots of special brews on tap for the occasion). Then there was my husbands album release party. Yep, my husband is among other things a musician and in his spare time he has been recording this album. He plays all the instruments, sings all the song, writes all the songs, does all the recording and he designed the cover! He doesn’t have a record deal or anything but we threw a a big party for all our friends and gave away loads of CD’s. I spent about $250 on the party. Worth it, it was the best fun we’d had in ages. Other spending money includes Netflix $12.99, Steam $5 and $80 booking a food and craft beer matching evening. I’m starting to think I should break down the spending money category a little further, but I don’t think I want to admit to myself just how much money I spend on beer.

Spending breakdown

The not so bad

Giving – It’s way down, I’ve only donated $174 so far this year, but I usually give more around Christmas. I don’t have an amount in mind that I want to give, its kind of ad hoc at the moment. I would like to be a bit more consistent with my donations.

Household goods – I bought two rugs online, we have hardwood floors and the rugs were on sale. They certainly make the place look more inviting but it was hardly a necessary spend.

Holiday spending – I booked a bus tour of craft breweries North of Auckland. It’s organised by my local craft beer club.

Transport – I used the bus a bit more last month and I had 2 Uber rides (both from events with beer consumption so I wouldn’t have to drive).

So many beer related expenses.

 

Credit Scores – Now With Instant Access

In New Zealand you’ve always been able to see your credit score, however you had to be prepared to wait a while and fill out some tedious forms and watch the mail box. I never bothered because I’ve never been denied credit so I just assumed it was OK.

Credit simple have come along and they make checking your credit score really easy, like just type in your drivers license number easy. In about 3 minutes I had my credit score, a respectable 740 putting me in the top 4% of people my age (and beating my husband by 8 points which he is absolutely gutted about). Nice I guess. Actually I’m kinda proud, I wanna put it on a t shirt! However New Zealand doesn’t do too much in the way of adjusting your mortgage rate based on your credit score so I’m not going to be offered a super low mortgage rate tomorrow despite my brilliant score.

New Zealanders on the whole don’t really understand credit scores that well and hardly anyone knows about them.

– 92 per cent of Kiwis don’t know their credit rating
– 72 per cent don’t know what a credit rating is
– Only 13 per cent have ever ordered their full credit file
– But when asked 84 per cent of people said they were “interested” to know theirs

Credit simple have done a pretty good job of promoting the new service and all of a sudden my social media feeds are filled with people checking out their credit scores, some are bitterly disappointed and others still not quite understanding what its all about.

The comments on twitter and Facebook would have been hilarious if they didn’t show up how ignorant we are of credit scores. So far I’ve seen it assumed that..

  • your star sign affects your credit score
  • your gender affects your credit score
  • the score is calculated based on the information you give to the website to identify yourself
  • that credit simple is using the website to track down people for debt collectors
  • its a giant social experiment to see how many people will put their identity details into a website

star sign does not affect your credit score!

I guess its nice to see a bit of skepticism when it comes to divulging information online. That is some small consolation.

Check your credit score online NZ

 

Credit simple are also coping a bit of flak for adding links to credit card and loan offers. Some are seeing it as preying on those with bad credit, but advertising is advertising. I expect to see adverts everywhere and when you are getting free instant access to your credit score then of course there are going to be adverts to offset the cost of running the site.

 



Instant access to your credit score (with no penalty) is long overdue. I think its great that this company was forward thinking enough to get rid of the ridiculous delays.

Most Kiwi’s only find out they have a bad score if they get denied for consumer debt and now there’s a little bit of a buzz around it. Anything that gets people to take a more active interest in their finances is a good thing in my book.

 

 

Burned by the $100 Pizza – A Split Bill Tale

Social outings can be disastrous when you’re trying to watch your spending, especially restaurants and bars. Most of the time I am a happy little introvert who likes staying in anyway but sometimes there are occasions you just don’t want to miss.

My family asked us out for dinner last week, I had been watching my spending so I did have some money left in my checking account. I was delighted that I could afford to go. Spending time with people I love and eating yummy food is a favourite activity.

My aunt chose an affordable restaurant, a gourmet pizza place. We checked the menu ahead of time and decided we could share a grilled duck and onion relish pizza (OMG yum) plus a glass of wine each. The total would come in well under $50 if we didn’t get tempted by any other tasty dishes (or the second glass of wine!).

At the end of the meal my Aunt announced that we will split the bill equally amongst the adults. I’m astounded as she often talks about her finances and I thought maybe she was watching her budget too. Even worse I feel too shy in front of my family to say anything. I caved and paid my share of the bill which came to ~$95 and some change. I have just paid $100 for a pizza and 2 glasses of wine and I feel terrible.

$100 Pizza split between 2 people
The most expensive pizza meal I’ve ever had. Ever.

So whats the solution? In this instance I will let it go because whats done is done, it was a special night out with some pretty amazing news being announced. (So I want to remember the night as a celebration!) Certainly I don’t want to be remembered as quibbling over the bill. However I learnt some important lessons.

For any transaction, know how you will be charged and don’t let others decide how to spend your money for you.
Lesson learned.

In future I will call ahead to the restaurant and see if they allow individual bill. Some places have let me order at the counter and bring my meal to the table with the rest of the group or pay separately at the end. I’ll also be upfront with family at the beginning of the meal. “Hey I’ve only got $50 for eating out tonight so I’m just going to split a pizza.” A little communication goes a long way.

It did get me thinking, what if I have been guilty of doing this? Have I ever put someone in the position of spending more than they wanted to? Perhaps I could be more sensitive to my friends and the social activities I suggest. For example I plan for spending some money every month on craft beer. I love it, I brew it, it makes me happy but I possibly have friends who get a little annoyed when I recommend going to the latest craft beer place, the beers are way more expensive than standard brews.

We all have different priorities for spending money and my must do craft beer experience is someone else’s $100 pizza.

OMG the Sky is Falling – Useless Media Panic

Our national newspaper is kinda sucky. Since the digital age they are all about click-baity headlines and celebrity gossip with a few bastions of journalistic integrety trying their hardest to break through garbage. It seems like most editors have been fired and fact checking is now a relic lost to the golden era of newspapers.

This recent dip in the market was covered by the business sections with new articles during the day, oh crap sky is falling, oh wait don’t worry we’re bouncing back, NO ACTUALLY PANIC because this afternoon investors sold everything!

Sharemarkets! everybody Panic screenshot-2016-09-13-21-46-24

“Fear returns” and “relief rally” are highly emotive and even in someone like me, who has been investing in shares since before the GFC, it still elicits a stirring in the gut.

My strategy is to just keep on keeping on. I’m investing in the sharemarket for the long term i.e more than ten years. I mostly hold index stocks and the companies I have bought individual stocks of seem solid enough (well nothings set in stone I guess) and I’m not worried about any of them going bankrupt overnight because of jittery markets. I still make my monthly contributions and if its gets too depressing looking at the share prices, I just stop looking so often.

Being well diversified keeps the panic at bay and helps me sleep at night. My investments are in multiple type of index funds and in multiple countries. I also have other types of assets like property, P2P loans and forestry.




It helps to be mentally prepared for dips in the market, imagine your net worth falling, imagine losing 10%, 15% 30% 50% of your net worth! And then think about what you would do in those scenarios. By thinking through worst case scenarios you’ll be emotionally prepared when they happen and less likely to make a gut reaction. You’re more likely to behave logically because you’ve “practised” how to react.

Another way to protect yourself from these sky is falling articles is to gain some insight into the way these sites work, they want clicks so the headlines are deliberately shocking. Brent Sheather wrote an insightful piece on the half truths and outright lies that appear in media finance commentary and that might help immunise yourself against being swayed by “expert opinions” in news media.

Of course maybe the best solution is just to just stop reading the business section?

 

 

 

How to be an Effective Saver

We all want to be super savers, but how do you get “good” at saving? Practise is a big part of it, you can’t help but get better at what you do often. Until the savings habit becomes a deep ingrained part of your psyche I thought I’d help you out by sharing some of the strategies I’ve used over the years to help me be a better saver. They’ve worked well for me but everyone has a different savings mojo.

Computers are our friends, let them do the work for you.

Automate – We already have so much to think about so make life easier on yourself and automate your savings. Have a portion of your paycheque go straight into your savings account. There’s no chance that you’ll forget some weeks and it won’t become a chore you have to remember to do every time you get paid.

Why are you even saving?

Save with purpose – Set savings goals, you might need an emergency fund, long term savings for retirement an short term savings for big ticket items, house deposit or a holiday. Keep emergency funds and long term savings separate. Savings for retirement need to grow so never dip into that stash of money. And how about taking it a level deeper, yes retiring early and establishing an emergency fund are excellent reasons for saving. But why do you really want an emergency fund? Why do you want to retire early. Take some time to think over the kind of financial situation you want for yourself and why.

You are your own worst enemy

Keep those dollars at arms length – If a nice fat bank balance is too tempting for you then open a savings account that is a bit trickier to access. Try another bank or an online only account. You don’t want to be able to flick money over to spend instantly when you are faced with temptation. If it takes a day to transfer over hopefully that will dissuade you from some impulse purchases! Don’t link the account to any cards.

 Bank your windfalls

Add pay rises to your automated savings – you won’t miss what you’ve never had. So don’t let pay increases lead to lifestyle inflation. Instead up the automated savings amount to match the pay increase.

Money

Grow cash GROW!

Money’s got to have a job, no lazy money! – Once you’ve built up some savings put those dollars to work. Don’t leave tempting piles of cash around as you might start to feel those dollar burning a hole in your pocket. A huge balance might make you feel wealthier but you can’t spend those dollars just yet, you need to grow them even more! Invest the cash into income producing assets, shares, index funds, property, bonds etc.

Squeeze out a few more dollars, you can do it!

Save everyday – Did you skip buying your lunch, did you negotiate a discount on a regular bill? Transfer those day to day savings out of your transaction account and into your savings as you go. Not only do you get the great feeling of scoring a deal your savings balance goes up as well. Twice the rewards!

Saving gets easier the more you practise, but one final thought. Saving can also become exhausting. A little mad money for guilt free splurges will help keep you sane and keep your savings on track. Good luck!

 

August Expenses – Prepaying a Future Holiday and Eating all the Foods!

At the end of month I started to feel like my spending wasn’t really in line with what I wanted for myself. I slipped back into buying a lot of lunches and drinking in bars on weekends. Living large baby! I was also putting some of these purchases on the credit card and come pay day I was transferring way more than I was comfortable with to get the credit card balance back to zero. Time to be real with myself. I cannot afford to live like that and have the financial secure future I imagine.

There is $500 of easy money that could have gone into investments this month. Instead it mostly went in my mouth. (It was all delicious stuff to be honest). Between that and the grocery bill I do believe I can find an extra $600 next month to go into savings. It’s hard being focused all the time and its easy to just slip into the buy “whatever you think you need in the moment” mindset. With a little more thoughtfulness I’m sure I can do better.

I spent a lot on Fuel last month but I still have 3/4 tank as I’ve been catching the bus a few days a week.

I prepaid a trip to Nelson for the New Zealand Homebrewers conference in March next year. Even using airBnB accommodation costs are so high! Still it was 30% cheaper than a motel.

Still throwing money at the rental property to pay for a $2,400 heating unit.

And my last thought is thank fark I earn a decent wage and my extravagant spending habits don’t get me into trouble.  I often worry that New Zealand is becoming a low wage economy and I see lots of big corporations paying their workers very low wages, not even a living wage. They all do it and slowly but surely they are eroding the middle class and therefore their own consumer base. Companies want their workers poor and their customers rich, well guess what, your customers are your workers.

Screenshot 2016-09-04 15.09.07

 

Screenshot 2016-09-01 17.31.02