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Is it too soon for me to think about investing in shares?

Page last updated: 12 May 2020

Gillian Boyes, Investor Capability ManagerBy Gillian Boyes, Investor Capability Manager

Times of volatility and big market swings are bringing out a lot of different emotions in New Zealand investors. Thousands of people have lost their jobs, whole sectors of the economy – aviation, tourism, hospitality and retail have taken a massive hit.

But along with this terrible news there’s also a lot of chatter about investing, particularly in shares. Many companies are seeking new capital to help their businesses grow and recover from the COVID-19 shock. Trading volumes are high on world stock exchanges and brokers are reporting a lot of interest from small investors.

So is this a good time to start thinking about investing in shares?

Share investing can help contribute to NZ’s growth

By buying shares in a company, you might be helping them expand and hire more people, enter new markets or develop new products or services.

Share investing will be an important part of our efforts to get our economy growing.

But think about your personal motivations for investing

Much of the talk we’ve seen includes speculation on which shares to buy to make a quick buck. But not even the experts can accurately and consistently pick share returns.

Instead, start by thinking about what you might more realistically achieve by investing in shares. For instance:

  • Reaching a long-term savings goal - Shares are best for goals that are 10 years or more in the future. Returns go up and down in the short term, but shares generally trend upwards over the long term.
  • Improving the returns you achieve - Generally shares provide better long-term returns than other investments like cash deposits – although they are higher risk. If your risk appetite is low, then look at lower risk investments.
  • Learning about the sharemarket – New online investing platforms like Sharesies and Hatch allow you to get started with a few dollars. This will give you a feel for how markets operate. There are also DIY platforms through banks and firms like Direct Broking for those with generally bigger balances to invest – these provide excellent guides on how the market works. Or work with a financial adviser if you’re keen to get started but don’t have the time or expertise to do it yourself.
  • Diversifying your portfolio – Diversification is the wise investor’s friend. Cash, bonds, shares and property should all be a part of your investment mix.

Think about the types of shares you might buy

Having a diversified mix of shares is key. Different industries, different risks, different markets – including New Zealand and overseas.

You may also be tempted by crowd-funding offers. While these can also be good opportunities, remember a few things before putting too much money into offers like these:

  • The companies offering shares through crowd-funding don’t have to provide the same rigorous offer documents that listed companies do.
  • The information may give a rosy view of the future and have fewer risks or potential problems outlined.
  • The good thing about owning shares listed on a stock exchange (like those available on Sharesies or Hatch) is that there’s an easily accessible market – the NZX – where you can sell if you need the money. With crowd-funding, you might find it hard to sell your investment.
  • An affinity and fondness for certain brands may mean you’re keen to help them out, so ask advice from someone else - a "sense check" to get an outsider’s view of an investment.

Remember you probably already own shares

If you’re in KiwiSaver you almost certainly already own shares.

The Smart Investor tool lets you download a list of every investment in your KiwiSaver fund. Search for your fund, then click on the detail to find a full list of investments the fund holds. Perhaps knowing you’re already in the market will reduce any FOMO you’re feeling about the ‘Need To Invest’!

Smart Investor also lets you research non-KiwiSaver funds. Starting with an ETF (Exchange Traded Fund) or an index fund that tracks a wide range of shares is a cheap and easy way to add to the shares you already own in KiwiSaver.

Focus on finding an investment that fit well in your overall plan and that matches a risk level and performance that you’re comfortable with.

A few other things to remember:

Take the time to understand how investing in shares works

Do your research on investing in shares before you make a decision. The disclosure and other information firms have to provide is for your protection. Our Share This! guide will help you understand what to look for.

em>And don’t panic when markets go down!

If markets drop, stay calm. If you’ve planned well, diversified your portfolio, and you’re keeping an eye on your individual investments you should still be on track to meet your long term goals.

Good luck!

For all you need to know about starting off investing in shares, check out our Share This! guide