Fund Update: Regular Investing with InvestNow, Cheaper SmartShares and More Funds in Sharesies

Got a couple fund updates in October 2017 including regular investing with InvestNow, cheaper SmartShares management cost, more fund options in Sharesies and new fund with Simplicity.

Regular Investing with InvestNow

InvestNow just rollout their regular investing options. Yay! Before that, every time investors transfer money to InvestNow, the money will be sitting in their “Transaction account”. The investor was required to log into their account and manually invest that money into funds. Not very robust.

Now with regular investing, you just need to instruct InvestNow how you want your fund distributed once and they will do it automatically. Also, with regular investing, the minimum transaction amount is lowered to $50. Here is how it works.

Once you login to InvestNow, you will see a new option called “My Plan”.

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Click create to start a new plan.

Screen Shot 2017-10-03 at 10.33.45 AM.pngYou decide how much you want to invest and how frequently. You can invest on a weekly, monthly, quarterly or six-monthly basis. Also, you can choose when the plan start and end. Below is an example for $100 invested monthly with no end date.

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Next is to instruct which fund you would like to invest by percentage. The minimum investment amount for a single fund is $50/transaction. If you are investing $100, you can invest in 2 different funds at $50/each or $100 in a single fund. Below is an example for $100 invested into two Vanguard funds.

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After that, click save and you are done. Make sure you set up an automatic payment from your bank!

I am glad InvestNow introduces regular investing options and lower the transaction amount to $50. It makes it easier for investors to set up automatic payment and use the dollar-cost averaging method to invest. It further lowers the barrier of entry and makes InvestNow be a “set and forget” investment solutions.

Check out their Regular Investment Plan page for more info.

Just be aware that minimum lump sum investment amount is still at $250/transaction.

InvestNow buy RaboDirect’s managed funds line

InvestNow just announced they acquired the Managed Funds product line of RaboDirect. RaboDirect started a marketplace for investment funds in 2006. In fact, the InvestNow’s managing director, Mike Heath, set up RaboDirect’s platform back then.

Now InvestNow acquired the Managed Funds product line from RaboDirect, their customer will transit to InvestNow platform.

I think it’s great as RaboDirect customer get to stay in the same fund and will save more on fees because InvestNow does not charge admin or transaction fee. It will also expand InvestNow customer based. I hope it will lead InvestNow to bring more high quality and low-cost index fund to New Zealand like Vanguard and Blackrock.

Check out my blog on InvestNow here.

Investnow – Invest in Vanguard Fund with 0.20% Fee

Smartshares reduces fee on award-winning ETF

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SmartShares’ NZ Mid Cap ETF recently won the New Zealand Equity Sector Fund of the year at the 2017 FundSource Awards.

The NZ Mid Cap ETF tracks the share price of 38 New Zealand Stock and its median market cap at 1,090 million. The index is made up of top 50 companies in NZ stock exchange but excluded the top 10 companies and product issued by non-New Zealand issuers. You can find the stock of The A2 Milk Company, Xero, Air New Zealand, Mercury, Mainfreight and Port of Tauranga in this ETF.

Here is the sector breakdown on Mid Cap ETF.

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SmartShares just lower their management fee from 0.75% to 0.60%. So this is good news for their current investors. This ETF used to have the biggest cost difference with their ETF fund counterpart in SuperLife. Now the cost is more in line with SuperLife ETF fund. However, SuperLife still has the lower management cost at 0.49%.

Check out my comparison on management fee between SmartShares and SuperLife.

Sharesies added New Socially Responsible Funds

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Sharesies, the new Wellington start-up, just added two socially responsible funds from Pathfinder Asset Management. They are The Pathfinder Global Responsibility Fund and the Pathfinder Global Water Fund.

Socially responsible investing also known as sustainable, socially conscious, “green” or ethical investing, is any investment strategy which seeks to consider both financial return and social good to bring about a social change. Those funds will invest in companies practices that promote environmental stewardship, consumer protection, human rights, and diversity. They avoid business involved in armaments, gambling, tobacco, thermal coal and pornography.

Pathfinder Asset Management said Environmental, Social and Governance (ESG) scores as one of the factors to invest with those two funds. Pathfinder Global Responsibility Fund targets 250 stocks from around the world and Pathfinder Global Water Fund target on 50 to 100 companies that generate significant income from water-related activities. Both funds are actively managed, and the management cost is 0.93% and 1.3% per year. Also, those two funds have a transaction fee on buy and sell of 0.05%. So if you invested $50 in either fund, $0.025 would be charged as a transaction fee.

I think Sharesies did a great job adding socially responsible funds on their platform as the fund will appeal to their core customers. However be aware of those two funds are actively managed, and there is a transaction fee on buy and sell.

Check out the fund info here. The Pathfinder Global Responsibility Fund and the Pathfinder Global Water Fund.

One More Thing

One last thing, Simplicity added Guaranteed income fund and I’ve got a sperate blog on that.

The Best Way to Invest for Your Children in New Zealand – What to Invest

This is the second part of my investing for children series. In a previous post, we talked about why should we invest for your kids and what you need to know beforehand. Now, let’s dive into what to invest for your children in New Zealand.

Index Fund & ETF for Kids

In case you don’t know, I am a big fan of the low-cost index fund and ETF because this is a low-cost investment option with a diversified portfolio and low entry requirement. Naturally, I will put my kid’s investment into them as well as a managed fund with ETF and Index fund in it. However, lots of investment services won’t accept anyone who is under 18 years old as investors. Basically, under their terms and conditions, you will have to be 18 years old or over to sign that agreement. Therefore, there are not a lot of choices for children.

 

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Looking for investment options for my kids

Furthermore, a good investment for kids is kind of the hidden gem out there. The one that advertised heavily aren’t very good, and you will have to dig deep to find the good ones. After lots of googling, emailing and reading, here are my top picks.

SuperLife MyFutureFund

Hidden Gem No.1 is Superlife MyFutureFund. This is a different service from SuperLife KiwiSaver and SuperLife Invest (non-KiwiSaver Service). This service doesn’t have a web page at the moment so you won’t find it under SuperLife web site. The information is buried under SuperLife Invest Product Disclosure Statement, page 26 and 27 of that PDF file.

(Superlife is currently redesigning their web site. MyFutureFund page will return after that.)

MyFutureFund itself is NOT an index fund or managed fund, it’s just a way that allows children to invest in SuperLife’s product. The account is in the child’s name but the guardian/person opening the account has control of the account including access to the funds through until 18 years of age. The account is separate from parents account, but you would be able to view the account through a “linked” membership.

MyFutureFund has access to the all Superlife investment options. There are over 40 different investment options available for kids including ETF, index fund, sector fund and managed fund. My personal picks for my kids are SuperLife 100 and Overseas Shares (Currency Hedged) Fund.

SuperLife 100 is made up of mostly Vanguard Index fund and ETF plus fund from Somerset. The investment included, 55% of international shares, 33% of Australasian shares and 12% listed property. The management cost is 0.52% and risk indicator at level 4. Three years return after tax (PIR at 28%), and fees are 8.35%. Seven years return is not available.

Overseas Shares (Currency Hedged) Fund is made up of eight Vanguard ETF. Invested 100% in international shares and mainly in US and Europe stock market. The management cost is 0.48% and risk indicator at level 4. Three years return after tax (PIR at 28%), and fees are 7.52%. Seven years return is 11.47%.

I picked those two funds because they are both diversified and contain 100% growth asset. Regarding fees, the management fees are relatively low, and SuperLife’s annual admin fees are only $12/years. They do not have regular contribution requirement, minimum investing amount can be just $1. So Superlife is great for both regular and irregular investing for your kids. I already got an account with SuperLife on my own so linking the kid’s account is straightforward and easy.

What about Investment for Mid-term

Those two fund that I suggested were 100% growth asset so they are aggressive fund. They provide great return for long-term investing. However, they will be too risky for mid-term investment. If you plan to use that money within 4-10 years, you may consider some other fund with lower growth asset.

SuperLife 30, 60 and 80 are similar to SuperLife 100 but added different percentage of income asset. Fund with more income asset will have a lower range of gain and loss in any given year and better return during recession compare to 100% growth asset fund. On the other hand, when the market is booming, those fund will have a lower return.

I think Superlife 30 will be ideal for 4-6 years investment, Superlife 60 will be great for 6-8 years and Superlife 80 will be ideal for 8-10 years. For example, if your kid is 12 years old and planning to use that money for the university at 19 year olds. Your investment timeframe will be 7 years and you should consider Superlife 60. For any plan under 4 years, term deposit with the bank is a good choice.

How To Join MyFutureFund

SuperLife doesn’t have the easiest way to join so there is how you can join them. You will need to fill in the application form from SuperLife and send it over by mail or email.

  1. Download and read SuperLife Invest Product Disclosure Statement
  2. Go to Applications form (page 22 of the PDF file) and fill out your kid’s details and use a separate email set up for kids investing.
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  3. Under Saving section, you choose how you are going to invest. It can be one lump sum investment, regular investment or both. The example below starts with $500 lump sum investment with NO regular contribution.
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  4. Fill out the Communications and ID verification. You should be using NZ passport or NZ Birth Certificate for the kid.
  5. Under Investment strategy, they will ask if you would pick their managed fund first.  If you wish to join SuperLife 100, just tick as below.
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  6. If you wish to join other funds or join multiple funds, you’ll need to tick “My Mix” and go to the next page.
  7. At page 5 of the application form (page 26 of the PDF file), fill in initial investment or regular investment. You can set the amount by actual dollar value or by percentage. At the example below, I invest 50% to Superlife100 and 50% to Overseas Shares (Currency Hedged Fund).
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  8. On the right side of My Mix page, you can decide what to do with your investment income. They can be reinvested into the fund or save the return in cash fund. Reinvestment is the most common choice for kids. Below that, you can decide rebalancing options, I suggest to use the standard rebalancing for the kids.
  9. At the next page (page 25 of the PDF file), after you pick the beneficiaries (usually “My estate”), DO NOT sign at the bottom. You should move onto the next page.
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  10. At the next two pages (Page 26 and 27 of the PDF file), you will have to fill in your own information as the guardian, supply the ID information, and sign it.
  11. Once you compeleted the application form, you can send it over to SuperLife and the investment account will be ready in a couple days.

If you have any other questions, contact Superlife with superlife@superlife.co.nz or call them at 0800 27 87 37.

InvestNow’s Vanguard Fund

The second gem is InvestNow. InvestNow is an online investment platform provide mutiple investment fund for their investors with low entery require and no middle-man fee. You can check out my blog post on InvestNow here. Unlike other investment service, InvestNow’s term and condition do not have a age restiriction. Therefore, InvestNow open the door are a whole range of investment fund for your kids. You can check out the full range of investment fund from InvestNow here.

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Out of all those investment options, my pick for my kids is Vanguard International Shares Select Exclusions Index Fund.  That fund launched for AUS and NZ market in late 2016. It contains about 1500 listed companies across 20 developed international markets (without Australia). This fund is an ethical fund as they excluded Tobacco, controversial weapons and nuclear weapons investment.

The BEST things about this fund is the cost. It only charge 0.20%/year on management fees and NO annual admin fee. The fund itself is a wholesale fund, which mean it usually only accept institutional invest. The minimum initial investment require was $500,000 AUD. The good news is, investors can join this fund via InvestNow with just $250 investment. (InvestNow will lower that requirement to $50 shortly.)

There is two version of this fund, one with NZD currency hedged with 0.26% managment fee and one without currency hedged with 0.20% management fee. Without currency hedge, the fund is exposed to the fluctuating values of foreign currencies. So this fund will have higher risk with lower cost. On the other hand, you will pay a higher fee for a more stable return with the currency hedged fund.

Here is the link to check out those two funds in detials.

Vanguard International Shares Select Exclusions Index Fund

Vanguard International Shares Select Exclusions Index Fund – NZD Hedged

Pay Tax on Investment

Those two fund have a different tax treatment compare to normal PIE fund. With PIE fund, investor usually just need to submit their IRD number and PIR rate once, then they dont need to worry about tax. With those Vanguard fund in InvestNow, they are Australian Unit Trusts and will be taxed under Foreign investment funds (FIF) rule. Investors is required to sumbit their income from FIF and file a tax return every year. If the holding amount is under $50,000 NZD, which should be the case for most children investors, you will need to pay tax on the dividend you received with the kids’ RWT rate. If the holding is over $50,000 NZD, you will have to calculate your taxable income with either Fair dividend rate (FDR) method or Comparative value (CV) method.

For children investors with portfolio value under $50,000, filing a tax return on dividend received is not too hard. You will need to file a Personal tax summaries (PTS) with IRD and it can be done online. I will share how I do that with my kids next year. Regarding FDR and CV method, I personally don’t know how to do it. You better to talk to a tax accountant for that.

How to Join InvestNow

InvestNow sign-up process is very straght forward so there won’t be a step by step guide. You’ll need to click on the join link on InvestNow home page and use a seprate email address to sign up. After you sign up an account, InvestNow will ask you to provide information on ideneifcation. You don’t have to complete that. Instead, contact them directly with contact form or call them at 0800 499 466 and let them know you want to set up an account for your children. Make sure you got the following information ready

  • Email address for the account
  • NZ birth certificate or a passport for a child
  • IRD number for the child
  • PIR and RWT rate for the child
  • Proof of guardian’s address

InvestNow will be able to set up an investment account from here. They can also link multiple child accounts to your current InvestNow account if you have one already.

Update in functions

Currently (at 19 Sept 2017), InvestNow don’t have auto-invest function and minimum transaction amount is at $250. So its not the best choice for someone who wants to reguarly invest for their kids because they will have to transfer $250 into InvestNow, then login to their platform and manually invest that money into the fund. The Good news is InvestNow will implement auto-invest function and lower the minimum transaction limite to $50 in the near future. So Investors can set up instruction to let InvestNow automatically invest into your prefered fund everytime you transfer money to them.

Conclusion

Here is the breakdown on my top picks compare to our kids investment requiremnt.

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  • Superlife MyFutureFund provide a full range of fund for different investment timeframe. They have all nessary function for you to setup different investment plan for your kids. A great “set and forget” solution. However, they don’t have the lowest fee.
  • InvestNow allow user to invest in a great Vanguard investment fund with 0.20% management fee and no annual fee. However, you will have to do tax return for your kid every year.
  • Feel free to contact them before you sign up and understand the process. I found both company are great with answering customer questions.

In next part of my investing for kids series, we will look at some other investment options including KiwiSaver, Bonus Bond, SmartShares and more. If you are currently invested in or considering some investment program for your kids and want me to cover them, drop me an email at thesmartandlazy@gmail.com. I will try my best to cover that.SaveSave

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InvestNow Added SmartShares ETFs into their Offerings

InvestNow announced they added 7 SmartShares ETFs into their investment platform. They are the following:

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You can access to those ETFs from SmartShares, Superlife, and Sharesies (on some ETF) already. I’ve compared the cost on those ETFs on the previous post and concluded you should get most of the ETF from Superlife except US 500; SmartShares was the better choice for US 500. You can check out the related post below

Related post: Compare ETF Fund Cost between Superlife and Smartshares

Cheapest Option for US 500 ETF

Smartshare was the cheapest option for investing in US 500 ETF because of the low management fee at 0.35% and no annual admin fee. There is a $30 set up fee if you use SmartShares contribution plan and at least $30 exit fee when you sell your ETF.
If you buy or sell the ETF on the share market, there will be $30+ transaction fee on each transaction. Superlife US 500 ETF fund has a higher management fee at 0.49% and charges a $12 annual fee. Sharesies have the same management fee with SmartShare, but they charge $30/year on admin fee. Therefore SmartShares contribution the cheapest option for US500 ETF investing.

Now InvestNow added SmartShares ETF into their offerings, it further lower the cost of US500 ETF. InvestNow offers an investment platform for investors with no annual admin fee. Investors can also bypass the $30 set up fee and the cost of exit the fund on SmartShares ETF. The minimum investment amount lower at $250 and no contribution commitment required. The management fee will be the same with SmartShares at 0.35%. Check out the comparison below.

 

 

Different Way of Contribution

By looking at the number, InvestNow investors can save on $30 set up and the $30+ cost of exit, so it appears to be a better deal to SmartShares. There is a difference on how you contribute to the fund between Smartshares and InvestNow. Take a look at the function difference below.

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The main limitation for InvestNow investors is the lack of small amount direct debit. SmartShares Investor will be committed to at least $50/month contribution (can be stopped at request). InvestNow investors are free to contribute whenever they want. However, the minimum contribution amount will be $250/transaction. If you only have $50/month to invest, you will have to put money in InvestNow once every five months to reach the $250 requirements. So on the one hand, you will save $30 in the beginning, but you will miss five months possible loss/return.

Compare Return Between InvestNow and SmartShares

To work out which one is the better deal on US 500, I ran an analysis to compare the return between InvestNow and SmartShares.

I assume the investor has $500 available to invest and can contribute $50/month. With SmartShares, the fund going to start with $470 due the to $30 setup fee and the investor will contribute $50/month. At InvestNow, investor’s fund will start with $500 and will contribute $250 every five months. The investor will continue for five years (60 months) without any withdrawal. Expected return rate is 10.32% before tax. Here is the breakdown.

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Although SmarShares charge a $30 setup fee up front which lowered the starting amount to $470, they ended up with a higher end balance at $4,640.51. The reason is Smartshares investor contribute $50 every month, and those funds are growing while InvestNow customer’s money is sitting in the bank doing nothing.

Here is the result of different levels of contribution at the end of the fifth year.

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SmartShares investor has a higher return over InvestNow at a lower rate, the gap close as they reach $250 marks. I stopped at $250/month because once you can contribute that amount, you can put money in InvestNow every month. From this point, InvestNow customer will always have better return over SmartShares

It seems SmartShares will be a better deal if your contribution under $200/month. However, there is a flaw in this analysis.

In my assumption, I set the rate of return at 10.32% for all five years. It assumpts the share price of the ETF going up in a straight line and investor will have a positive return every month. However, in real life share price goes up and down every day. By contributing less frequently, InvestNow investor may lose some of the gains during those five months, but they also avoid some drop as well. Afterall, the share price looks like this in real life.

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Applying Real Data

So I collected the share price of US 500 ETF for the past 24 months and plugged that into our analysis. Here is the result. Click here to see the ROI. 

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This time InvestNow ended up with a higher balance over SmartShares. In fact, Investnow beats SmartShares on every contribution level with past data. Check out the result below.

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The Real Deciding Factor

No one knows how the US 500 ETF is going to perform in the future so either service can be cheaper. If you look closely at the amount, the cost difference between InvestNow and SmartShares are insignificant, less than 0.1% of your fund. So investors will need to consider their contribution level and the experience of those two services.

In my opinion, InvestNow functions and its user interface are much better than SmartShare. InvestNow have a modern, clean and easy to understand platform. SmartShares’ holder will be checking their current stock holding on Link Market Service web site. The interface feels like it stuck in 2010.

Related post on InvestNow and SmartShares (Link Market Service)

The main limitation on InvestNow is lack direct debit option, so it’s not a “set and forget” type of investment solution. The investor will have to deposit the money into InvestNow platform and manually invest US 500 ETF on InvestNow website. InvestNow said the direct debit function is on the road map so the situation may improve in the future.

Link Market Service interface for SmartShares is not good, but you can view your holding on other services like ShareSight, Google Finance, and Yahoo Finance to improve that experience.

Conclusion

It’s great to see InvestNow adding more and more fund onto their platform. I prefer InvestNow interface and function over SmartShares. However, I understand everyone circumstances are different so here are some recommendations which service you should consider on US 500 ETF.

  • Use SmartShares if you want a ‘Set and Forget’ solution and you plan to contribution between $50 – $200/month.
  • Use InvestNow if you like their user interface (you can register for free on InvestNow to check out the interface), don’t want to commit to a monthly contribution plan and happy to invest manually at minimum $250.
  • Use SuperLife if you already have a portfolio with SuperLife and want to have all funds under one flexible service with great functions.
  • Use Sharesies if you like their interface. Check out my comparison here.
  • For other ETFs, you should use SuperLife, here is why.

Email thesmartandlazy@gmail.com or follow me on Twitter @thesmartandlazy if you have any questions.

 

 

SmartShares, SuperLife, Simplicity & InvestNow. ETF & Index Fund Investing in New Zealand

ETF and Index Fund are simple, low-cost and diversified investment option with a positive result in the long term. It plays an important part in my plan to achieve financial freedom by only do a few smart things and nothing much else. To put my money where my mouth is, over 90% of my investment is in ETF and Index Fund. I believe everyone should have at least some investment in those products. SmartShares, SuperLife, Simplicity, and InvestNow are the four investment services in New Zealand that I am currently using. Here is a breakdown of them.

The Breakdown

(updated Oct 2017)

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SmartShares

New Zealand Stock Exchange owns SmartShares. They issue the ETF for local share markets such as NZ Top 50 (FNZ), NZ Top 10 (TNZ), NZ MID CAP (MDZ) and NZ Bond (NZB). They also repackage ETFs and index funds from overseas to sell to New Zealand investor. Those ETFs cover Austraila, Europe, Asia Pacific, US, emerging markets and world markets. You can check out the list of offering here. The most popular overseas ETF is US 500. It tracks the top 500 companies on US stock example, most of them are top international corporations.

Some people have mistaken SmartShares as an investment service provider but in fact, SmartShares is an ETF issuer. Their job is to manage and issue ETF for New Zealand stock exchange. That’s why investor can’t log onto SmartShares site for track their holding because they are not managing the holding for you (hence there is no annual admin fee).

If you invested in their ETF, you are basically buying a share on the share market. You can but those ETF directly on share market if you wish.  SmartShares will direct investor to Link Market Service to register and track their ETF holdings. An investor can track their holding on other services like ASB securities, ANZ Securities or Share Sight.

SuperLife

Superlife offer the most ETF and Index Funds investment options in New Zealand. They not only offer SmartShares ETF in fund format but also provide managed fund and sector fund options for the investor. All of those funds invested in a passive index fund or ETF.

The Sector fund cover different country (NZ, AUS, Overseas), industry (Property, Shares) and investment vehicle (Cash, Bond, Shares). Those are great options to build your own balanced and diversified portfolio.

The Managed Fund is is a grouping of financial assets such as stocks, bonds, and cash equivalents. The nature of those financial assets can be classified into two groups, income asset, and growth asset. Income asset includes cash and bond. They tend to carry lower risk levels and, therefore, are more likely to generate lower levels of return over the long term. Growth assets are shares and property. They tend to carry higher levels of risk, yet have the potential to deliver higher returns over longer investment time frames.

Superlife managed fund has different names, like SuperLife 30 or SuperLife 80. The number at the end show the target portion of growth asset in that fund. Superlife 30 will aim to hold around 30% of growth asset and 70% of income asset in the portfolio. So this fund is a low risk (or conservative) fund. On the other hand, Superlife 100 will aim to invest 100% into the growth asset. So the risk is high. Here is a breakdown.

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SuperLife offer the most options, functions in the breakdown. The entry requirement is basically nonexistent, and the cost is relatively low. That’s why I recommend the beginner to start with Superlife.

Simplicity

Simplicity started as a nonprofit KiwiSaver provider. They provide low-cost KiwiSaver options to New Zealander while donating 15% their income to charity. Simplicity recently opened up their investment fund as non-KiwiSaver options as investors can deposit and withdraw their investment anytime they want. Simplicity only offers three managed funds as conservative, balance and growth fund. The majority of Simplicity fund invested in Vanguard’s funds or ETFs. The management fees are the lowest in New Zealand at 0.31% for managed fund. However, the initial investment requirement is $10,000.

InvestNow

InvestNow is a new online investment platform. Investors can directly invest into the selected fund on their platform with as little of $250. InvestNow does not charge any transaction, admin, setup or exit fee at this stage. Investor only needs to pay the management fee on an individual fund.

The biggest advantage of InvestNow is to allow the investor to directly invest into two Vanguard index fund in Australia. They are Vanguard International Shares Select Exclusions Index Fund (currency hedged and non-hedged version) with management fee at 0.20% and 0.26%. Those two funds are not PIE fund, means you will have to do your own tax return. For under 50k holding, you will only have to do tax return on dividend received, which is not that hard. You can check out the detail in this blog post.

Fund Comparison

I picked a couple of index funds and ETFs from each provider and made a comparison. Here is the breakdown.

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As you can see, most of the option’s underlying asset are Vanguard ETFs and Index Fund. That’s basically what I am trying to do on my international exposure, putting money into low-cost Vanguard cost for long term.

 

Me try to invest in NZ 2

Accurate description of my international investment strategy.

Conclusion

  • Superlife have the most function, investment options and easy to start. Also, have the lowest cost aggressive managed fund in NZ. It is great for both beginner and experienced investor.
  • Simplicity has the lowest cost managed fund in Conservative, balance and growth area. Great for anyone with $10,000 to start investing.
  • InvestNow user can easily invest in Vanguard index fund in Australia with 0.20% – 0.26% fee. Great for someone who can handle their tax return on dividend received (not that hard) or calculate under FIF rule.
  • SmartShares is good if you wish to buy ETF on the share market.
  • There are other ways to invest into a passive fund and ETF in New Zealand, like ASB Investment Fund, AMP, and Lifestages. However, the cost of those funds is quite high compared to these four services, which defeat the purpose of low-cost passive investing.
  • New Zealand investors can buy Vanguard ETFs on Australian Stock market. The management fee can go as low as 0.04%. I will go into that later once I’ve done it myself.

 

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Simplicity Cease Offering on InvestNow… but Don’t Let it Stop You

Last Friday I wrote about investing Simplicity non-KiwiSaver fund via InvestNow from as little as $250.

However, I am sorry to say this opinion is no longer available. Simplicity decided to cease offering on InvestNow.

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You can read the statement from InvestNow here.

I am personally disappointed as this is a great way for anyone to invest in a quality low-cost fund with a low initial investment. I was planning to invest in Simplicity fund but I don’t have the fund until next month, so I missed out on that.

What does it mean for the investors?

If you are InvestNow user and you already invested your money into Simplicity fund via InvestNow, you will be able to hold your investment in the fund, but you will not be able to make new investment.

For those who wanted to join Simplicity Fund but don’t have $10k available, you will have to keep saving until you reach $10k…. or not. Hear me out!

Don’t wait, Start NOW!

If you have some money to invest now, you don’t have to wait. I would suggest you invest those fund elsewhere rather than save for months and years to reach $10K.

I know Simplicity fund is excellent, and I may even say it’s the best fund in this country. However, that is just the best fund when you have $10k or more. It doesn’t mean you can’t invest in anything else before you come up with $10K.

You can invest in Superlife 80, which is similar to Simplicity growth fund. Superlife 80 holds 80% growth asset (Share, property) and 20% income asset (Bond, cash). They also invested in Vanguard fund and ETF. Superlife a higher management fee (0.50%) and small annual fee ($12). The most important thing is there is no minimum initial investment requirement. If you are young and happy with the risk, you can go with Superlife 100, a managed fund with 100% growth asset, something Simplicity do not offer.

If you already put the money in InvestNow, you can invest in their Vanguard fund with just 0.26% fee. Simplicity Growth invested 60% into that fund (and you will have to pay tax on dividends received). I’ve done a blog post on that.

My point is, there are lots different opinion for investor out there. Don’t let that $10K hurdles stop you and start investing. You will reach $10k before you know it.

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Investnow – Invest in Vanguard Fund with 0.20% Fee

Investnow is a new online investment platform and fund management service just started this year in New Zealand. It is NOT an investment firm but a marketplace for investment funds. Kiwi investor can directly invest into the selected fund on investnow platform without the middle man. I’ve done some research on the company and invested some money via the service. Here are my findings.
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Range of Fund

Investnow offers 33 different investment funds from both local and international fund manager. The investor needs to deposit minimum $1000 $250 into Investnow transaction account and invest into the fund on their platform at $250 minimum.
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Here is the list of the fund provider
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No Transaction/Admin/Joining/Setup/Exit Fee

The main selling point for Investnow is no transaction/admin/Joining/Setup/Exit fee at all. When you put $1000 $250 into Investnow, Investnow won’t charge anything on your money. You can invest that full $1000 $250 into different funds. You only need to pay the cost of each investment fund.
Investnow made their profit by charging investment fund providers to list their funds on their platform.

The REAL selling point

Since investor can contact most of those investment funds directly and set up an account, no transaction/admin fee is not a real selling point here. For me, the real selling point for Investnow is low barriers to entry and Vanguard fund.
If you want to invest into those funds directly without Investnow, the majority of those funds have a minimum initial investment amount from $2000 to $500000. For example, Fisher Fund’s International Growth fund require minimum $2000 initial investment and Mint asset management’s Australia New Zealand Real Estate Investment Trust minimum investment is $5000. If you invest from investnow platform, you can put only $250 into those funds. It dramatically lowers the entry requirement for those funds and makes it more accessible to the average retail investor.

Vanguard fund

Vanguard

The most significant benefit with investnow (for me at least) is you got access to Vanguard International Shares Select Exclusions Index Fund. That fund launched for AUS and NZ market in late 2016. It contains about 1500 listed companies across 20 developed international markets (without Australia). This fund is an ethical fund as they excluded Tobacco, controversial weapons and nuclear weapons investment.
Simplicity Kiwisaver invests heavily into this Vanguard fund. 61% of Simplicity Growth fund invested in Vanguard International Shares Select Exclusions Index Fund.
There are two versions of this fund. Vanguard International Shares Select Exclusions Index Fund has a low managed fee at 0.20%. The Fund is exposed to the fluctuating values of foreign currencies, as there will not be any hedging of foreign currencies to the Australian dollar. So this fund has a higher risk due to foreign exchange fluctuation. Vanguard International Shares Select Exclusions Index Fund – NZD Hedged are hedged in New Zealand Dollar with a higher management fee at 0.26% but with lower risk.
For individual investors, if you want to invest into this fund directly, you will have to start with $500,000 AUD. Investnow lower that entry barrier down to just $250. In my opinion, this is a great fund to invest because of the low-cost, diversified portfolio and low barriers to entry.

Everything sounds good, so what’s the catch?

Yes, there one thing not so good about Investnow. You’d need to do your tax return if you invested in Vanguard funds.
Admittedly, I am not good at tax. So the following information may be wrong.
From what I understand, those two Vanguard funds are not the same with other listed fund on their platform as they are not PIEs fund. Vanguard funds are Australian Unit Trusts. Accordingly, they are taxed under the FIF rules (that apply to global shares). Investors need to do their own tax return. Investnow produces consolidated tax information to help investors to complete their own FIF tax return.

My Experience

After some research and background check on the company, I invested $1000 into Investnow and tested it out.
The sign-up process was quite simple; I managed to complete in 5 mins. The interface is easy to understand. The funding and investing took 1-2 days to complete. You can check out your holding and performance any time.
Check out the screenshots below. 
 
One thing worth mentioning is Investnow use a Two-Factor Authentication for login. You need your username, password and a six-digit passcode that send to your email or phone to log in. I recommend using your phone to received that passcode in txt.

Conclusion

So far I am happy with the Investnow as its allow me to access Vanguard fund with just $1000 $250 investment AND no one charging me extra fees in the middle. The service is straightforward and easy to use. The only concern will be the tax implications on its investor if you invest in the Vanguard fund. (Personally, I need to figure that out before next April.)
InvestNow is free to join. You don’t have to deposit $250 to become a user. You can just sign up with an email address and check out the offering.
Investnow is a new company; some investor will (and they should) question the legitimacy of the company/service and the safety of their investment. I’ve done research on that and I will share that in the next post.
(UPDATE: InvestNow recently lower their minimum deposit amount to just $250.)
Email thesmartandlazy@gmail.com or follow me on Twitter @thesmartandlazy if you have any questions.