In recent years, investing in shares has exploded in popularity for everyday Kiwis!
With the introduction of new apps that make buying and selling shares super easy, Kiwis have jumped on the chance to invest their money.
Are you curious about investing? Well then, this is the guide for you!
What is share investing?
Share investing refers to the selling and buying of shares in a company in order to make money.
Shares are small units of a company that you can own. Each share is priced equally according to the company’s value. The price of a share can fluctuate. The more shares you have, the bigger the chunk of the company you own. Shares may also be referred to as stocks, securities or equities. Shares are publicly traded on a stock exchange, with shares having both a buy price (bid) and a sell price (ask).
Nowadays, stock brokers have made the process of investing easy. You can do it all on your own from your computer or phone (often referred to as DIY online trading).
Share investing is a great way to invest your money. Shares can go up in price, growing your initial investment. Plus, some companies will offer dividends on their shares, another source of income for you.
Just remember that since the process of investing can be challenging, it’s important you are in a position where you can afford to lose any money you invest.
You have to be in it for the long haul. It’s not the best idea to jump into investing if you don’t see yourself doing it for more than 5 years, due to the short amount of time in which you could lose money.
How do I start investing in shares?
There are a few steps that you need to take in order to get into share investing! It’s important to take your time, do your research and explore all your options before investing your money anywhere.
Here are our steps to getting started:
1). Decide between Passive or DIY
First, decide how you want to invest in shares. There are two ways you can buy shares. You can invest in a managed fund (exchange-traded fund or index fund) where someone else manages and invests in shares for you (Passive) or look into specific companies and choose who to invest in yourself (DIY). Many people decide to go down both avenues. However, if you’re starting out, you’ll likely want to stick to the Passive approach as it’s much easier. Once you’ve had some time to see how the stock exchange works, you may want to change your approach.
2). Understand your investing choices
Once you’ve figured out whether you want to invest via the Passive or DIY approach, it’s best to understand what your specific investing choices are.
There are three options to choose from:
Exchange-traded funds (ETF)
These are investments where you buy small portions of shares in various different companies in a single trade. When you invest in an ETF you own small pieces of each of those companies. So, as share prices rise or fall, your ETF will do the same. The benefits of ETFs are that you can be less hands-on with your investment, spread your risk out, and cut down on brokerage fees since you aren’t buying individual shares.
Index funds
Index funds function very similarly to ETFs. However, you can only invest in an index fund through a broker. Whereas, ETFs can be purchased on the stock exchange. Index funds can often come with a ‘minimum investment,’ ranging between $100 - $20,000. However, some investing platforms have lowered these costs significantly.
Shares
Shares don’t charge you management fees like ETFs or index funds do. Plus, dividends go straight to you whereas any dividends acquired in an ETF or index fund will be put back into the fund to buy more shares. However, choosing individual shares can involve a lot of time and research.
3). Pick your broker!
To start investing, you’ll need to use a broker or investing platform. Nowadays, there are heaps of great options to choose from! Choose the one that offers you the best service for the types of investments you want to make.
Here are the most popular brokers in Aotearoa!
Sharesies (ETFs, managed funds, and individual shares in NZ, Australia and US markets) - GET $5 FREE with Money Compare - click here
Direct Broking (ETFs and individual shares in NZ and international markets)
ASB Securities (ETFs and individual shares in NZ and international markets)
Smartshares (ETFs in NZ and international markets)
Hatch (ETFs and individual shares in US markets) - Get $10 FREE with Money Compare - click here
Stake (ETFs and individual shares in US markets) - Get free stock in Nike, GoPro or DropBox with Money Compare - click here
Tiger Brokers (ETFs and individual shares in Australia, US, Hong Kong, China, and Singapore markets) - EXCLUSIVE OFFER! Claim up to NZ$80 cash bonus and enjoy zero fees*! - click here
InvestNow (managed funds for NZ and international investments)
Kernel (index funds for NZ and international investments)
4). Set your budget
When it comes to investing, it’s important you set a strict budget. The general rule is that if you have enough money to set aside each month to invest, then you can probably dive into share investing.
Most experts suggest putting 75%-80% into index funds and 20%-25% in other investments like bank deposits. This is ideal for those looking to make long-term financial gains.
If you are wanting to invest in individual shares then only allocate a small amount of your total investments (10%) into them as there is much higher risk involved.
5). Dive in!
Now that you’ve decided how you want to invest, which broker you’ll use, and what your budget is… it’s time to start investing!
Just remember that building a diverse portfolio for your funds is one of the safest ways to invest! Only invest in individual shares for a certain company if you believe in their long-term growth (even then, it can still be a big risk).
Jump on Money Compare!
If you’re wanting to get into investing, then head to Money Compare!
Money Compare is a comparison website where you can compare all your financial plans!
We have just launched our comparison pages for investing! Here, you can compare different brokers and important things like cost per trade, minimum trade values, minimum account balances and more!
You’ll be able to find the perfect deal in no time!
All you have to do is: Jump on our website, enter in a few details, select filters that match your preferences and hit enter! Then you’ll see all the brokers available to you. You can compare them all side-by-side on one page.
It couldn’t be simpler!
Start your investing journey today with Money Compare!
COMPARE SHARE TRADING PLATFORMS
*This is an educational guide only. It is in no means specific financial advice. Please consult a professional financial advisor for any specific financial advice you may require.*
