Investing in financial products like shares, bonds, funds and KiwiSaver are all ways to grow your wealth. Regularly putting a little money aside today can reap rewards later in life.
But there are myths about investing that stop many people from taking part. They imagine investors as flash young risk-takers with money to burn. They remember times past when some investments did fail.
Investing isn’t risk-free. In fact, if there’s one single truth, it’s that no investment is risk-free. That’s why the proverb ‘Don’t put all your eggs in one basket’ is especially true in investing.
As for the untruths about investing – the myths that may be stopping you or someone you know from taking part – there’s no one better to dispel them than Mary Holm, who's been demystifying personal finance for Kiwis for several decades, in books, columns and on the radio.
In this booklet written by Mary for the FMA, she sets the record straight on eight common myths about investing. It’s a quick guide for anyone who’s thinking about or already dabbling in investing – and wants to know more.
Myth #1 - "I am not an investor" If you’ve ever earned interest in a bank account, you are an investor. Mary Holm defines 'investing' as setting aside money where it can grow by earning ‘returns’. Instead of spending it now, you can spend it later, and hopefully, you’ll have more to spend. Read more about this myth.
Myth #2 - "KiwiSaver isn’t a real investment" Your KiwiSaver is certainly an investment and a really good one at that. Government contribution of up to $521 a year, and employer contributions for employees, make KiwiSaver hard to beat compared to other investments at a similar risk level. Find out more about the differences between KiwiSaver and other managed funds along with how to define the best type of fund for you. Read more about how "KiwiSaver isn’t a real investment" is a myth.
Myth #3 - "Investing is just too risky" There are investments available at all risk levels. The safest investments are government bonds and Kiwi Bonds, which are backed by the New Zealand Government. However, they often pay low returns. Find out more about your risk profile and what you can do to reduce your investing risk. Read more about this myth.
Myth #4 - "I'm not rich enough to invest" These days there are several ways you can invest small amounts. On some online investment platforms, there is no minimum investment at all, and you can make tiny regular investments. Read more about how careful investing is a way to build wealth over time. Read more about how "I'm not rich enough to invest" is a myth.
Myth #5 - "Real investors play the share market" That doesn’t make them any more ‘real’ than people whose only investment is KiwiSaver or some bank deposits. Find out how to maximise your savings. Read more about this myth.
Myth #6 - "Investing is too difficult and time-consuming" Investing doesn’t have to be hard. You don’t need to be watching daily or even monthly price changes. And you certainly don’t need to be buying, selling or moving your money around in reaction to market movements. Find out more about the four ways to keep your investing simple. Read more about the "Investing is too difficult and time-consuming" myth.
Myth #7 - "I'm too old to start investing now" While it’s great to start investing when you’re young - so you can really benefit from compounding returns over the years - it’s never too late to start. Read more about how anyone can start investing regardless of their age. Read more about this myth.
Myth #8 - "Getting advice is too expensive" Advice can be particularly helpful when your situation is changing. Perhaps you’re starting a family, buying your first home, receiving an inheritance or approaching retirement. Read more about this myth.