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

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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.

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InvestNow Added SmartShares ETFs into their Offerings

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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. (Update: InvestNow client can now set up regular investment with just $50/transaction.)

 

 

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. (Update: InvestNow client can now set up regular investment with just $50/transaction.)

Compare Return Between InvestNow and SmartShares

(Update: InvestNow customer can now set up regular investment plan with just $50/transcation. InvestNow will be a better choice over SmartShares in terms of cost.)

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. (Update: InvestNow customer can now set up regular investment plan with just $50/transcation. InvestNow will be a better choice over SmartShares in terms of cost.)
  • 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.

 

 

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Sharesies (Beta) – How does it stack up to SuperLife and SmartShares on ETF Investing

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Sharesies is rolling out their trial run (a.k.a beta) investments options couple weeks ago. I’ve got their invitation recently and checked out their offerings. Sharesies is currently offering six SmartShares ETFs for their investor including NZ Top 50, AUS Top 20, US 500, NZ Bond, NZ Property and AUS Resources. You can check out their current offers here.

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What is Sharesies

Sharesies is a New Zealand financial start-up company supported by Kiwibank Fintech Accelerator. They are an investment platform where users can make investments with small amounts of money. One of their mission is to make investment fun, easy and affordable.

The main selling point of Sharesies is by paying a $30 annual fee, an investor can invest into multiple investments with the minimum at just $5. Also, there is a $20 credit for the early Beta investor.

Invest $5 into ETF

In comparison, SmartShares ETF initial investment is $500, set up cost is $30/ETF and monthly contribution minimum is $50. So Sharesies is a great way for beginner investor to invest in a small amount into many low-cost, diversified ETFs. It bypasses the $500 initial investment and $30 set up fee with each ETFs.

On the other hand, SuperLife also offers the same ETF in their investment fund with a different management cost. You can check out the detailed comparison here.

While Superlife also doesn’t require initial investment and the minimum contribution can be just $1. How does Sharesies stack up to SuperLife and SmartShares on ETF investing?

Sharesies vs SuperLife & SmartShares

I’ve picked two popular ETF, NZ Top 50 and US 500, to run an analysis for 60 months (5 years). The analysis will compare the result on different contribution level(low and high contribution) for all three services. The low contribution will be at Sharesies minimum requirement, $30 initial investment (for the annual admin fee), $20/month contribution (about $5/week); The high contribution will be at SmartShares minimum requirement, $500 initial on each ETF, $50/month conditions.

NZ Top 50 ETF at low contribution

Here is the fees structure on the ETF

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This is the amount of low contribution and expected return

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So Sharesies have a higher admin fee ($30) and ETF management cost (0.50%), so its expenses should be higher then Superlife NZ top 50 ETF. Since Sharesies are aiming for beginner investor, I put around $5/week as a low-level contribution. The $30 initial investment cost is to cover Sharesies annual fee. Smartshares will not be included in this analysis as the investment amount is too low.

Here is the investment return each year

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Superlife did better as it has a lower management fee and admin fee resulted in a higher return for the customer. The 5-years different is $135.81, 8.4%.

NZ Top 50 ETF at high contribution

This is the amount of high contribution and expected return

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We increased the contribution to $50/month, put $500 as an initial investment and include SmartShares into the mix.

Here is the investment return each year

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SmartShares came out on top despite the fact that they have a higher management cost. The main reason is that Smartshares don’t have an annual admin fee while Superlife charges $1/month. However, if you wish to cash out those Smartshares at this stage, it will cost you at least $30.

The difference between SmartShares and Sharesies is $163.34, 3.3%. Although both services have the same management cost, Sharesies charge $30/year admin fee which brings down the balance.

US 500 ETF at low contribution

Here is the fees structure on US 500 ETF

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This is the amount of low contribution and expected return

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This is more interesting as Sharesies have a lower management (0.31%) cost compare to Superlife (0.44%).

Here is the investment return each year

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Due to the small amount of holding, the lower management cost (0.35%) did not cover the higher annual fee ($30) with Sharesies. Superlife holding was $122.28 more then Sharesies in year 5, 8.1%.

US 500 ETF at high contribution

This is the amount of high contribution and expected return

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Now we will do the same thing by increasing the investment to Smartshares minimum requirement.

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SmartShares USF came out on top with no annual fee and lower management cost. The different between SmartShares and Sharesies at year 5 is $154.75, 3.3%. The different to Superlife is $41.5, 0.9%.

In both scenario, Investor with low contribution level and better with SuperLife. If you have the $500 and $50/month to invest, SmartShares is the cheaper way. (Although I will suggest going with Superlife on NZ top 50. I’ve already covered that in another post)

How about portfolio building?

Since Sharesies investors can bypass SmartShares setup fee and initial investment requirement. So Sharesies is actually a great tool to build a simple portfolio. I will use US 500 ETF, NZ Top 50 ETF and NZ Bond ETF to build a portfolio.

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Here is a balanced portfolio you can easily build with Sharesies. 25% NZ Bond, 37.5% US 500 and 37.5% NZ Top 50. If we keep the low contribution at $20/month, you can put $5 in NZ Bond, $7.5 in US 500 and $7.5 in NZ Top 50.

If you wish to set up something similar in SmartShares, you will have to spend $30 x 3 =$90 on set up fees, at least $500 x 3 = $1500 initial investment and $50 x 3 = $150/month contribution. Not feasible at all.

SuperLife, on the other hand, as my best pick for portfolio builder in New Zealand can easily build the same portfolio. Let’s check out the cost difference.

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Here are the contribution and return

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Here is the investment return each year

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Superlife still edged out at year 5 with $123.15 more, 8.2%. I didn’t do a high contribution comparison here because SmartShares are really not fir for portfolio building.

Conclusion

Based on the analysis, SuperLife is still the better choice on low contribution and most of the high contribution (except US 500 ETF) regarding cost. However, I still think Sharesies is doing something good here.

Sharesies is promoting to young Kiwis who never invested before by providing a straightforward and easy-to-use app. The sign-up process is simple and painless. The interface is robust and delightful. They’ve done an excellent job on explaining each investment options to beginner investment and make it accessible. Check out the screenshots below.

 

 

I don’t mind about the $30 admin fee if that what’s it take for a newbie to start investing for their future. I’ve been telling readers to spend $12/year on Superlife as they have a better user interface and functions over SmartShares. Sharesies interface and user experience are way better than both of them. They made investing as easy as shopping online, which should bring a lot of people into the world of investing.

Sharesies are still in beta, so there are some functions are missing, like reinvest and auto allocation. I am sure Sharesies will continue to improve on their functions and brign in more investment options. Hope more companies like Sharesies will pop up in New Zealand to bring more people into investing.

More investor, bigger the market size, lower the cost!

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