November 24, 2017 ETF, Investing SmartShares 3 Comments

SmartShares New Investor Portal (Bye Link Market Service)

by Alpha

SmartShares just added a new investor portal for their existing investors. This portal makes it easier for investors to check and manage their SmartShares investment.

The Old Days…

In the past, if you join the SmartShares saving plan (a.k.a monthly contribution plan), you will have to register with Link Market Service with your CSN and FIN number to check the value of your holding. If you want to change your contribution level or make a lump sum investment, you will have to contact SmartShares by phone or email to arrange that.

Now with the new Investor Portal, SmartShares user can

Actively manage their regular savings plan;
Make lump sum contributions to their Smartshares account;
Invest in additional ETFs without additional establishment fee; and
View their investment balance

This service is available for all existing SmartShares saving plan client for free. Let’s check out the portal.

New Investor Portal

When you go to SmartShares website, you can see there is a new section on the top right “Existing Investor”.

Once you are in, you will need your CSN and FIN number to login.

Your CSN number will be on your SmartShares monthly statement, check your email. Your FIN was sent to you by mail when you first joined SmartShares. If you’ve lost it, you will need to contact Link Market Services to get a new one send to you by mail (I mean physical mail). They will NOT give out FIN over the phone or email.

Once you logged in, you can see your account info. (I will be using my son’s ETF account here.)

The next part is the breakdown of your current holding. It will show the fund, Units of ETF, the stock price of ETF, the current value of your holding and your current monthly contribution amount. You can change your monthly contribution amount here.

You can also make a lump sum contribution here. The minimum amount is $250.

The next part is the best function of this portal. Existing investors can add new fund without paying additional establishment fee!

What you’ll need to do is click on “Add Fund” and pick the fund you want to add, the initial investment amount (minimum $500) and monthly contribution amount (minimum $50/month). This benefit is only available for existing investor. If you are new investor, you will have to pay $30 establishment fee for once.

If you just need to check your holding value and don’t want to make any changes, you can just close your window or go to another web page (there is no logout button).

If you want to change your contribution amount, make a lump sum payment or add fund, you will have to click next at the bottom of the page and confirm your personal detail.

Conclusion

Overall, it makes sense for SmartShares investors to check and actively manage their holding on SmartShares website (Bye! Link Market Service). The interface is clean and easy to understand. I think its a bit odd to use your CSN and FIN to log in and I imagine some investors will have a hard time to find their FIN number.

The best thing is existing investors can add new fund easily, and don’t have to pay additional establishment fee.

With the new portal, it doesn’t mean it will replace Link Market Service. If you want to check transaction history, you still have to go back to Link Market Service. For other functions, SmartShares investor portal will take care of that.

October 3, 2017 ETF, Index Fund, Investing investnow, Sharesies, SmartShares, Superlife Leave a comment

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

by Alpha

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”.

Click create to start a new plan.

You 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.

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.

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

InvestNow Added SmartShares ETFs into their Offerings

Smartshares reduces fee on award-winning ETF

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.

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

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.

August 23, 2017 ETF, Investing, Personal Finance Advanced Investing, IRD, New Zealand, PIE, PIR, RWT, SmartShares, Superlife, Tax 5 Comments

Different Tax on SmartShares and SuperLife ETF

by Alpha

Recently a tax accountant contacted me regarding my post on comparing cost on ETF investing between SmartShares and Superlife. He pointed out that apart from the admin fee and management cost, investors also need to consider the tax implication when investing. I’ve known about this issue but did not include on my blog because I did not fully understand the rules. After I’ve asked around and done some research, here is my finding on different tax treatment on SmartShares and Superlife ETF and why does it matter to New Zealand investor.

Disclaimer: I am NOT a tax accountant or expert. In fact, I am pretty bad at tax despite I’ve done a couple tax papers at university. So what I am going to say would be incorrect. If you notice anything wrong in my blog post, please let me know and I will correct that ASAP. You should contact a tax accountant or IRD for tax advice.

What are PIE and PIR?

According to IRD website, a portfolio investment entity (PIE) is a type of entity, such as a managed fund that invests the contributions from investors in different types of investments. Eligible entities that elect to become a PIE will generally pay tax on investment income based on the prescribed investor rate (PIR) of their investors, rather than at the entity’s tax rate.

Prescribed investor rate (PIR) is the tax rate that PIE fund use to calculate the tax on the income it derives from investing your contributions. It based on your taxable income, e.g. income from salary, wages and any additional sources of income (including the income from your investment) that you would include on your income tax return.

For an individual, your PIR can be 10.5%, 17.5% and 28%. Check out IRD web site to work out your PIR rate.

How PIE Works?

I will explain PIE with ‘interest on saving account’ as an example. You usually received interest by saving money in a bank account. If you look closely at that interest transaction, you can see the bank gave you some interest, then IRD take away some as ‘Withholding tax’. Check out the transaction below.

So I earned $0.79 in interest, but IRD took $0.26 away. The amount decided how much IRD can take is based on my Resident withholding tax (RWT). In this situation, the RWT is 0.26/0.79 = 33%. You can work out your RWT here.

For people who are having a full-time job, their RWT rate will likely to be 30% or 33%. That’s where PIE come in. The most common PIE fund you will see is the PIE account at your Bank. There are ANZ PIE Fund, Term PIE at BNZ, PIE Funds at Kiwibank and Westpac Online Saver PIE.

If you put money in those PIE accounts, in stead of paying 30% or 33% on your interest earned, you will be paying the max PIR rate at 28%. So in my situation, IRD will only tax $0.22 on my $0.79 interest income. The amount may seem tiny here, but if you have $20,000 saved in a PIE Term deposit with 3.5% interest, you will just have to pay $196 on tax instead of $231.

Different PIEs with SmartShares and SuperLife ETF

There are different types of PIEs and we will talk about Multi-Rate PIE and Listed PIEs here.

Multi-rate PIE (MRP) is a type of PIE that uses the investors’ prescribed investor rates (PIRs) to calculate the tax on the investment income it earns from the investors’ contributions. Most PIEs are multi-rate PIE including SuperLife and Simplicity fund.

A listed PIE is a type of PIE listed on a recognised exchange in New Zealand, and they calculate the tax on a fixed rate regardless of investors PIR. SmartShares ETFs are listed PIE, and they will pay tax at 28%. Check out section 6 on SmartShares’ product disclosure statement.

So the main difference between those two investments are you will pay 28% tax on SmartShares ETF and with SuperLife ETF Fund, you will pay tax according to your PIR.

Why Does it Matter to Investor

An investor needs to work out their PIR so they can decide each provider is more tax efficient. You don’t want to overpay your tax. There are three different PIRs for individuals: 10.5%, 17.5% and 28%.

For people who earn over $48,000 a year for the past 2 years, their PIR will likely to be at 28%. In this case, there is no tax different between SmartShares and SuperLife ETF as you will pay 28% on taxable income with both funds.

For people who are on low or no income, their PIR could be at 10.5% or 17.5%. They can be students, children, part-time/casual worker, stay-home mum/dad and retirees. In this case, they will pay tax on their PIR with SuperLife ETF Fund while SmartShares will still charge 28% tax on them. Therefore, they will pay extra tax with SmartShares.

Here is an example on US 500 ETF valued at $20,000. We will compare the value after tax and fee with the different tax rate. Assume there was no contribution and no value change during the year. Taxable income calculated at 5% of the portfolio under FIF rule. Ignored Smartshares $30 setup fee.

Despite SmartShares have a lower management cost and no annual admin fee, investors with 10.5% or 17.5% PIR will end up better with SuperLife as they paid less tax. That’s more reason for you to choose SuperLife ETF Fund if you are on low PIR rate.

Conclusion

If your PIR is at 28%, pick SmartShares or SuperLife based on cost, functions, and experience. In my opinion, SuperLife is the better choice for most ETF except US 500 ETF. You can check out my comparison here.
If your PIR is at 17.5% or 10.5% SuperLife ETF Fund provide a better return due to the lower tax paid. The amount of tax saved will increase the value of your portfolio.
Investor at lower PIR can get the excess tax back with a tax return.
Since most of the investment funds are multi-rate PIE. It is essential you work out the correct PIR and submit that to your fund manager. You can work out your PIR here.
Consult IRD or a tax accountant for tax advice.

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

August 18, 2017 ETF, Investing ETF, investnow, Sharesies, SmartShares, Superlife, US500 3 Comments

InvestNow Added SmartShares ETFs into their Offerings

by Alpha

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

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

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.)

Screen Shot 2017-08-17 at 10.15.08 PM.png

Comparing cost on US 500 ETF. Best option in yellow.

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.

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.

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.

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.

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.

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.

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.

June 28, 2017 ETF, Investing, Personal Finance Basic ETF, Investing, New Zealand, Sharesies, SmartShares, Superlife 20 Comments

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

by Alpha

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.

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

This is the amount of low contribution and expected return

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

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

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

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

This is the amount of low contribution and expected return

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

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

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

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.

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.

Here are the contribution and return

Here is the investment return each year

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.

June 23, 2017 ETF, Investing Financial, Investing, New Zealand, SmartShares 4 Comments

How to Start Investing with Smartshares and How Long will it Take

by Alpha

SmartShares is an excellent way to invest in low-cost, diversified ETF in New Zealand. Especially if you wish to invest in the top 500 companies on US stock market. Smartshares S&P 500 ETF (USF) is a great option for all investors as it is simple to understand, the management cost is low at 0.35% and has a long positive track record. I’ve been getting questions on how to start with investing with various investment service I covered and the most of the questions on Smartshares. So here is the guide on Smartshares.

How long will it take?

Let’s set the right expectation here, its gonna take a LONG time to set up a monthly contribution plan with SmartShares. For average Kiwi investor (without any connection to politician or United State), will take about 2-5 days to set up with most investment services. However, with SmartShares, you will have to spend around 27-53 days. Yes, that is not a typo. Just make sure you are prepared for it.

Sign up with SmartShares

We are going to walk through the setup process for an individual investing $500 into S&P 500 ETF with a $50/months contribution. Before we start, you will need to prepare the following items.

IRD number
NZ Drivers Licence
Bank account number for direct debit
Read the product disclosure statement

Go to Smartshares Invest Now page and click on “Apply online.”

Under investment options, select “Individual”, leave it blank on “Common Shareholder Number” if you are a new investor. Put $500 (minimum) on US 500 (USF) investment and $50 (minimum) as regular saving plan.

Next page is your personal information and email address. That email address will be your main point of contact. You will receive an email during the set process to confirm your email address.

Next is your ID verification. Put in your NZ Drivers license details.

Next, confirm your payment details with your bank account no. Please make sure you have enough fund at 20th of each month.

Next part you will have to review your information and confirm your contact email with an authentication code.

Here is the authentication email with the code.

Once you completed this process, you are done with the sign-up. The next part is the long wait….

What you are waiting for?

The SmartShares signup process is straightforward and painless. However, investors need to wait a long time to check up on their holding. An investor cannot log on to SmartShares to check their holding. SmartShares will direct investor to use Link Market Service to do that. To register for Link Market Service, you will need two pieces of information: FIN (Faster Identification Number) & CSN (Common Shareholder Number). FIN will send to you by mail (physical letter), and CSN will be on your holding statement in an email. You will need those two numbers to prove you own those stock. Check out this page from ANZ Securities on what is FIN and CSN.

The long wait

So here is my timeline on signing up with SmartShares.

4/5 – I submitted my application on SmartShares website.

8/5 – I got a confirmation email on my SmartShares application and my direct debit.

20/5 – $500 initial investment withdraw from my account, and it supposes to make the purchase at the beginning of June.

6/6 – the purchase happened

7/6 – a letter came into my mailbox with the FIN number. I still can’t log onto Link Market Services because I don’t have the CSN number.

12/6 – got an account statement from Link Market Service with my CSN number.

I managed to log into Link Market Service and check out my holding. Yeah!

So it took 39 days for me. To be fair, I can submit my application on 12/5 or 13/5, it will still make the 20th direct debit cut-off date. So you can shorten 7-8 days there. On the other hand, if you submit your application right after the 20th cut-off date, you will have to wait over a month.

Why it took so long?

Smartshare is NOT an investment service or fund manager. They are an ETF issuer. ETF is not an investment fund; they are tradable shares. Usually, you will have to set up a brokerage account and pay a fee to buy shares in New Zealand Stock Exchange. The minimum is $30/trade.

SmartShares offer a service allow investor buy shares in a small amount monthly without paying a brokerage fee. If I have to do it in the with a stock broker, it will cost me at least $360/year on brokerage fee alone. I am happy to wait a couple of days to save $360.

If you don’t want to wait that long, you can open up a stock brokage account and buy SmartShares directly on the stock market. It will take 2-5 days to set up a brokage account, and it will cost at least $30/trade.

Hope this blog will set an expectation for you when you sign up SmartShares. Don’t be panic when they took your money for 2 weeks without any communication. Your FIN and CSN will arrive…eventually.

June 13, 2017 ETF, Index Fund, Investing, Personal Finance Advanced Financial, Investing, investnow, Simplicity, SmartShares, Stock market, Superlife, Tax 5 Comments

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

by Alpha

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)

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.

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.

(updated Oct 2017)

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.

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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June 8, 2017 ETF, Investing, Personal Finance Advanced ETF, Financial, Investing, New Zealand, SmartShares, Superlife 12 Comments

Compare ETF Fund Cost between Superlife and Smartshares (2017 Update)

by Alpha

Recently SuperLife and SmartShares lower the management fee on four ETFs. So it’s time to update the ETF cost comparison. Also, I am changing my initial recommendation on starting your investment with SmartShares then switch to SuperLife.

Cost update

Both Superlife and SmartShares lower their cost on Total World, Europe, Asia Pacific and Emerging Markets ETF. The reason was Vanguard reduce their underlying fee, so SuperLife and SmartShares passed on the cost saving to its customer.

Should you start with SmartShare?

In the past, I recommended to start your ETF investment with SmartShares then switch to Superlife when the fund hit a certain amount. The main reason was Superlife charge a $12/year admin fee, it will cost more in terms of percentage for beginners with a small amount of investment. However, that calculation ignored the $30 one-off initial fee, the cost of setting up extra funds with SmartShares and the exit cost.

Let’s look the following example for an investor started NZ Top 50 ETF with $500 initial investment and $50/month contribution for 5 years. NZ Top 50 ETF 5 years annualized return is 16.49%. I’ve put it in a simple simulation to compare investment between SuperLife and SmartSharesand for 5 years.

SmartShaers started with $30 less due to the setup fee. That $30 initial different made Smartshares cost more for that first 3 years, (38 months to be exact). By the end of the 5 years, the different between Superlife and Smartshares is only $24.09. That’s about 2 years of SuperLife admin fees and represent about 0.44% of your holding. That percentage will decrease if we increase the investment amount. So, there are some saving with Smartshare, but the saving is insignificant.

Also, there are some other benefits with SuperLife.

Better user interface compared to Link Market Service
Easy to switch fund with no cost
No setup cost for new fund
More fund options included sector fund and passively managed fund
No withdrawal cost

Personally, I think those benefit worth that $12/year with Superlife.

My Recommendation

If you wish to invest in S&P500 ETF, NZ Cash ETF and Emerging Market ETF, start with SmartShares because their management fee is still lower than SuperLife.

(UPDATE at Aug 2017, InvestNow added S&P 500 on their platform. An investor can bypass the $30 setup fee with SmartShares while having the low management cost at 0.35%. Check out the details here )

For any other ETF, just go and join SuperLife. You will be much better off.

If you are currently holding SmartShares ETF and want to switch to SuperLife. There is a way to switch without open a brokage account and pay $30 to sell your Smartshare. However, you will have to email me on that.

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

May 3, 2017 ETF, Investing, Personal Finance Basic ETF, Financial, Investing, New Zealand, Personal Ffinance, Shares, SmartShares, Stock market 4 Comments

How Easy to Get Your Money out from SmartShares ETF

by Alpha

SmartShares offer 23 exchange-traded fund (ETF) in New Zealand. They tracked different stock and industry index in New Zealand, Australia, United States and international market. It is an excellent opinion for Kiwis investor due to the low-cost and diversified portfolio. So, how easy to get your money out? (Spoiler alert: Very easy)

ETF is tradable share

ETF is similar to an index fund that tracks an index, a commodity, bonds, a sector or a basket of assets. However, ETF can be traded on the stock market like any other stock. ETF shareholders are entitled to a proportion of the profits, such as earned interest and dividends paid.

Liquidity of shares

Since ETF is a share, i. In order to get the money out, you will have to sell your ETF in the stock market, just like any other stocks. This brings us to Liquidity of a share.

Liquidity means how easy for you to sell your share into cash on the stock market. If lots of people wanting to buy that share and lots of willing seller on the market, the liquidity is good.

We use trade me as an example here. If you are selling a brand new iPhone on trade me at a price closed to everyone else is selling, you will be able to sell that iPhone quickly. Also, you can use similar amount cash to buy an iPhone on trade me without any problem. So the liquidity of an iPhone is good on trade me.

However, if you want to sell an expensive and rare antique phone on trade me, it may take months and multiple listing to sell that phone. You may have to lower your price to get it sold. It also hard to find another expensive and rare antique phone on trade. So, the liquidity of an expensive and rare antique phone is bad.

Let’s take a look at Auckland International Airport’s stock info.

You can see there is lots of buying (Bids) and selling (Asks) order. Lots of trade happened in 13 mins. The different between buy and sell price (a.k.a. Bid-Ask Spread) is only $0.5c.

Now compare that to Delegat Group Limited’s Share.

There are some buy and sell order, but there was no trade at all. The different between buy and sell price is $10c. There is a seller want to sell 2000 units of share at $6.25, but there is no one taking that offer. If the owner of that 2000 share intends to liquidate the stock quickly, they will have to lower their selling price by $10c to $6.15 to meet the closest bid. That is $200 less on 2000 share.

If you are an owner of Auckland International Airport share, It will be very easy to liquidate your stock in a short time. On the other hand, if you hold shares in Delegat Group Limited, you will have to wait or lower your price for someone to buy your share.

Here is the info on two popular SmartShare ETF, NZ Top 50 and US S&P 500.

Both of them have a good amount of bid/ask and the spread is small. Therefore, the liquidity is good.

Also, there is a market maker for all Smartshare ETF.

Market Maker

A market maker is an investment firm that guarantees liquidity of stock by putting out buy and sells order on the stock market. They make sure investor can always buy or sell the shares.

The Bid and Ask below are the market maker order.

Screen Shot 2017-05-03 at 2.15.07 PM copy

Screen Shot 2017-05-03 at 2.15.19 PM copy

At December 2014, SmartShares appoints Craigs Investment Partners as the market maker. Craigs will offer two-way quotes of agreed minimum volume and maximum spread for an agreed minimum period of the full trading day. This will cover all current Smartshares ETFs, plus future ETFs launched by Smartshares.

You can read the full press release here.

Always ready to sell

With a market maker on all Smartshare product, its very easy to liquidate your Smartshares holding. However, you will need a stock broker to sell your shares. Especially for those who purchase Smartshares via monthly contribution plan since you don’t need a broker account to do that. Smartshare is not an investment fund, they will not cash out the ETF for you. Lots of people don’t know that.

In order to sell your Smartshare ETF, you will need a broker to put your holding on the stock market. You can google “Stock Broker NZ” to contact any broker firm and set up an account. The cheapest way for most people is to use ASB and ANZ securities to trade online. ANZ cheapest rate is $29.90/trade under $15000. However, you have to be an Online Multi-Currency Account (OMCA) holders with sufficient cleared funds available to fully cover the purchase of securities prior to submission of the order. Otherwise, ANZ charge $29.90 + 0.40% on trade. If you are not an OMCA holder with ANZ, go with ASB Securities, they charge $30 or 0.30% per transactions, whichever higher.

If you currently hold SmartShares ETF and don’t have a brokerage account, do it ASAP. You never know when you need to sell you share in a short period. It will take 2-10 days to set up account with ASB and ANZ. If you starting a monthly contribution plan with SmartShares, make sure you open a brokerage account as well.

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

April 11, 2017 ETF, Index Fund, Investing, Personal Finance Basic ANZ, ASB, Cheapest, Comparison, ETF, FNZ, Investing, New Zealand, Personal Ffinance, SmartShares, Superlife Leave a comment

Cheapest Way to buy and hold NZ Top 50 ETF

by Alpha

I always encourage people to start a small investment with NZ Top 50 ETF and US 500 ETF when they are starting out. Those two ETFs are easy to understand, diversified, low-cost and have low minimum investment requirement ($500). They are ideal for long term (7 years+) investment. So here is the cheapest way to buy and hold NZ Top 50 ETF.

I will be discussing average investment here. I do not include KiwiSaver opinion here because you can’t get the money out before 65. (Anyway, ETF still an excellence option for KiwiSaver, especially for anyone aged under 50)

What is NZ Top 50 ETF?

Quote from Smart Shares Web Site:

The NZ Top 50 Fund invests in financial products listed on the NZX Main Board and is designed to track the return on the S&P/NZX 50 Portfolio Index. The S&P/NZX 50 Portfolio Index is made up of 50 of the largest financial products listed on the NZX Main Board. The S&P/NZX 50 Portfolio Index is made up of the same financial products as the S&P/NZX 50 Index, but with a 5% cap on the weight of each product.

So basically when you invest in NZ Top 50, you will have a share in the top 50 companies in NZ stock market.

Stock code for NZ Top 50 ETF is FNZ.NZ

Where and how to buy?

There are three ways to purchase NZ Top 50 ETF, on the stock market, with investment fund or monthly contribution.

Trade on the stock exchange – NZ Top 50 ETF can be traded as share on stock market via any stock broker. I will be using ANZ Securities online and ASB securities online here as they are amongst the cheapest brokers in New Zealand.

Purchase with Fund – Superlife (Smartshare’s sister company) offer NZ Top 50 ETF fund that holds shares in NZ Top 50 ETF. You can set up an account and purchase those fund with Superlife.

Purchase via monthly contribution – This is the most accessible and fixable way to buy into ETF, both Superlife and Smartshare offer that service. You need set up an account with at least $500 initial investment, and contribution $50 monthly to purchase that ETF or fund.

What’re the fees?

Basically, you should look for the lowest fee when you consider investing into the same product.

ANZ & ASB Securities online: You can purchase FNZ directly on the stock market with ANZ Securities. ANZ cheapest rate is $29.90/trade under $15000. However, you have to be an Online Multi-Currency Account (OMCA) holders with sufficient cleared funds available to fully cover the purchase of securities prior to submission of the order. Otherwise, ANZ charge $29.90 + 0.40% on trade. If you are not an OMCA holder with ANZ, go with ASB Securities, they charge $30 or 0.30% per transactions, whichever higher. On top of that, NZ 50 ETF charge 0.50% p.a. on management fee base on your total holding before they pay out. If you did the calculation, in order to pay the least amount of fees, you should only make one trade a year with over $10000, which will bring the fee% to 0.80%.

Smartshares: You can make lump sum investment and monthly contribution with smartshare. They will charge a one-time $30 account setup fee and charge 0.50% p.a. management fee base on your total holding. Check out the SmartShares disclosure statement here.

Superlife: Same as Smartshare, you can do lump sum investment and monthly contribution. They charge a $12 p.a. administration fee and 0.49% management for NZ 50 Top ETF. Check out Superlife disclosure statement here.

Cheapest Way?

Smartshares is the cheapest way to buy and hold FNZ. Superlife’s fee will become cheaper once the holding passed 120K.

I personally used both Smartshares and Superlife, and I think Superlife have a much better user interface and app. The $12 admin fee can be shared with other Superlife funds.

So if you just want to buy FNZ, Smartshare is the best deal out there. If you already have other funds with Superlife, there is not much difference in cost between Superlife and SmartShares.

Although ASB and ANZ Securities’ cost are higher, you should open an account with them if you got ETF from SmartShares. Since you are buying actually share of ETF via Smartshare, you will need a stock broker when you need to sell your share.

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