Where Do You Invest ?

• 

  Bill on 24/12/2023 - 22:12

  I just put all my excess money in the Kernal wealth global 100 index fund.

  • 

    gooddeals on 25/12/2023 - 15:41

    Depending how much you are investing and for planning to invest for how long, for an EFT such as Global 100 index fund, would you be better off by directly buying the EFT via a trading platform (one off fee e.g. $5 per trade (plus exchange rate of 0.5%) rather than having an annual fee of 0.25% via Kernel +/- exchange rate? esp if you like to hold on this investment for a longer term?

    the interest return at around 2%, having a PIE structure with Kernel may not justify this?

    • 

      Joe on 26/12/2023 - 00:27

      Works for lump sums . and FIFS- they can be complex Kernel does it all for you. . How do you mean 2% return?
      Global 100

      since Inception 57.50%

      • 

        gooddeals on 26/12/2023 - 00:58

        The interest component that is taxable is around 2% per year so not much benefit being in a pie environment like Kernal compare to do it your own. Does Shareies do it all for you including tax? Come to think of it 0.25% flat rate per year can be quite significant amount over a long time. It's not very clear what extra value Kernal does over Shareies?

        • 

          JG34 on 30/12/2023 - 10:50

          +1

          @gooddeals: Tax will likely be the same for any platform you choose. The main differences will come from the type of fund you're investing into (i.e if its a PIE or non PIE)

          PIE funds (which all Kernels funds are) are taxed under the Fair Dividend Rate method (which is set as 5%). To calculate total tax per annum for a PIE fund, it would your PIR (Prescribed Investor rate) x FDR.

          It is likely most people will have a 28% PIR; so 28% PIR x 5% FDR = 140. This will mean there is a 1.4%pa tax on the global shares in the PIE fund — which the PIE fund will subtract this automatically.

          This also means you are essentially wealth taxed 1.4%pa on your global shares, as the FDR is supposed to primarily tax the income of the PIE (dividends) but in negative years, you will still be required to pay the 1.4%pa tax — which over time disrupts compounding significantly. Albeit there is no CGT on PIE's.

          Non PIE's are taxed under FIF — Non PIE vs PIE TLDR; Non PIE's can be beneficial for some depending on your marginal tax rate and amount invested in global shares, although can be significantly more complicated to work out the taxes as you will need to do it yourself (or an accountant)

          • 

            gooddeals on 30/12/2023 - 17:04

            @JG34: thank you. but sounds like there is more to it, but you say depends on circumstances.

            if (total) investment is less than $50,000, one is exempt from the Foreign investment fund (FIF) tax.. (only pay tax on the dividend component of the investment).

            For investments greater than $50,000 on the year in the negative balance, one does not need to use the FDR method? using the Comparative value for the year where you made a loss or less than 5% gain would be either you did not get taxed for a loss. not a wealth tax as such. but the additional PIE fee is certainly fixed regardless of gain or losses.. and can compound over time.

            there is an IRD calculator

            https://www.ird.govt.nz/calculate-my-fif-income

            There may be other advantages for a NZ based PIE fund like Fx hedging, but again whether this results in actual financial benefit would also depends on circumstances, more of an extra function but benefits may vary?

            • 

              JG34 on 31/12/2023 - 11:57

              @gooddeals: Yes, some people opt to invest in Non PIE funds up until the $50k threshold (or little bit lower so dividends don't push you over the threshold).

              For Non PIE funds >$50k, yep you can opt to use the CV or FIF FDR method. Whether that is better than a PIE fund depends on various factors as mentioned before. This calculator by Kernel is helpful:

              https://docs.google.com/spreadsheets/u/2/d/1iBTUP7WKyaaEzBe4…

              Also in PIE funds, the FDR method unintentionally operates as a form of wealth tax.

              • 

                gooddeals on 31/12/2023 - 19:23

                @JG34: Thank you. It would also good to clarify if all pie funds always use FDR method. This does not seem to be the case as I know of some exceptions to this. May be worth asking a provider such as Kernel to clarify the benefit of their fee and their approached to taxes etc… Or people can post a comment here.

                • 

                  JG34 on 31/12/2023 - 20:37

                  @gooddeals: As far as I am aware PIE's can only use the FDR method. Would be interested to see what these exceptions. Main benefit of a PIE fund is the tax is capped at 28%

                  So a PIE fund tax is calculated by FDR (5%) x PIR (prescribed investor rate) which is capped at 28% in PIEs.

                  Non PIEs can use CV or FDR method. But the difference in using the FDR method in Non PIEs is it's not capped. So the tax could be as high as 39% (FDR x 39%).

                  • 

                    gooddeals on 31/12/2023 - 23:35

                    +1

                    @JG34: ok, I will ask a few providers, to clarify in regard to whether PIE account can only use FDR method, May be something I could clarify if IRD.. if IRD allows different methods, then the provider may not be acting at the best interest for the client.

                    I have a managed fund and kiwisaver under PIE, and often during the times of poorer performance, there is a tax refund for the year, or much less tax than 5% x 0.28 = 1.4%, but the tax refund may not be related to the FIF methods chosen but may be related to fees being tax deductible. I will come back once I have some official answers.

• 

  Meridian on 24/12/2023 - 22:20

  The answer is all of the above. You want to get a good spread of all of the things. I personally have all of the things you mention including a tiny bit of crypto currently - although did pretty well out of it in the past and had a lot more but sold out at a good point (luck more than skill in that one).

  One thing you missed is businesses - ie directly own or operating your own businesses. That can be a big wealth generator

  Another is just cash, its never bad to have some cash - and with interest rates pretty high its a low risk/low effort thing to have.

  Like most NZ'ers I have a disproportionate amount in property both in NZ and AU - but I'm working on building up the rest but at the moment they are not amazing investments with little capital gain and are not an hands off investment. Would be better to have that money in the bank on term deposit, but over the long term it should be fine.

• 

  Moodkiller on 24/12/2023 - 22:49

  • 75% is in Simplicity's High Growth Fund ($0 management fee and 0.29% annual fee)
  • 20% is in various crypto (for the long term)
  • 5% is in a Squirrel on-call account (7.5% interest per year)

  Regarding those management fund fee's, I would definitely shop around. Simplicity is one of the cheapest (if not the cheapest) at the moment and they also give back to various communities + have their Simplicity Living scheme (if these are important points to you).

  The long term "bang for buck" is NOT to have a large amount of money sitting in your bank account. I keep 2-3 weeks worth of wages in there at the most.

  Obligatory "this is not financial advice" and "do your own research" note

  • 

    Jexla on 26/12/2023 - 12:20

    +1

    Squirrel on-call is 5.25% not 7.5%.

    • 

      memske on 26/12/2023 - 12:52

      Probably has it in a squirrel term investment.

    • 

      Moodkiller on 26/12/2023 - 12:54

      +1

      You're right, sorry memory failed me (was thinking of the investment funds)

• 

  bot on 25/12/2023 - 08:36

  I put a fair amount into VOOG ETF (S&P 500) - 1y return to date is 28.58% https://app.hatchinvest.nz/us/investments/VOOG
  managed funds
  bank savings (6m-1y)
  Do have some crypto, but pretty sure that boat has sailed, but no point in selling at this time.

  But like other have said, diversity is key, try not to put all your eggs into 1 basket.

  Personally I think, get your primary home as soon as you can, then work on other investments (instead of paying rent, you pay your mortgage) obv not suited to everyone's situation. That way even if your stocks or other investments tank, you still have somewhere to live. idk, maybe this is obvious.

• 

  ScoobyNZ on 26/12/2023 - 00:12

  If you don't want to face the volatility / security risks of BTC by holding it yourself, then wait until Bitcoin ETF's are approved and wait for the slew of offerings from local financial companies. Although they won't be as quick off the mark as US / Europe companies as our market is much smaller, so you will lose some of the current local prices.

  The one current local company offering a BTC fund is Vault - https://vaultdigitalfunds.com/

• 

  NovaAlpha on 01/01/2024 - 03:06

  +1

  I personally invest in real estate properties and made a shitload of money from flipping houses. I mean a SHITLOAD.

  With stocks, cryptos and other investment opportunities, they're a bit too volatile and unpredictable for me personally. I also don't have the time to analyze and read up on all the different company reports and news to properly and heavily invest in stocks and cryptos. Don't get me wrong, I usually have pretty good judgement on which stock to buy. I did well with GME, Tesla and Nvidia (this year). But the problem is knowing WHEN to buy and sell at the right time and that means you always gotta follow the news, read up on company reports, and check various things. One day Elon decides to tweet random nonsense, and then he drives Bitcoin and Tesla up. Another day, some memes about Dogecoin spread, and the value of it went up. If you've got a lot of time to analyze all these things and make constant buy/sell, then that's great, but it's not for me. I will say though, try to invest in tools that help you invest in stock, like TYKR for example. I think you can grab a lifetime license from Stacksocial.com and it's a platform that analyzes current trends and news and provides a bunch of useful insights and infos on different stocks. Great tool to have for deciding whether a stock is a good buy or not in general.

  Day trading is even worse. I have friends who do day trading and are way richer than I am. But it's literally a day job in itself. They also use a bunch of AI tools to predict patterns, create strategies and whatnot. All a bit too much for me.

  ETFs are generally quite safe, but the return is kinda low for me. But yeah I just put a couple thousand in there and monitor it every now and then.

  With real estate, it's just a waiting game. As long as you buy at a good price and wait a while, you'll get a pretty good return, and your rental income basically covers the mortgage (interest only). I don't really have to put in much of my own money apart from the initial 20% deposit. The rest is just mortgage from the bank, which again is offset by the rental income. I have a property that I bought 2 years ago and if I were to sell it now, I would make a good 850~900K on it easy and I've already had offers from a few developers and non-developers, but I'm waiting a bit longer to see how it goes. The other thing with real estate is that it's tangible. If something goes south, well hey at least you've still got a house to live in. House prices have always gone up according to historical trend, regardless of recessions. To me, it's just really easy to identify properties that are a sure bet, compared to buying stocks or cryptos.

  Other things to consider is FX investment. There's a lot of arbitrage trading strategies and loopholes that you can use to "legally" earn a profit. Kinda the same when it comes to crypto. But again, you'd also have to look at current trends in the world, as the currency of the country generally goes up/down based on how well the country is doing and what decisions they're making. Lots of keeping up with the news. Also note that most FX trading platforms will watch out for trading strategies that are considered immoral or in a grey area, so you'd have to be pretty creative and sneaky to do this consistently.

  The other thing that a lot of people forget to mention is tax optimization. Set up a business and find legal ways to deduct tax. If your business makes a "loss", that offsets your income on your investment/salary.

  Also, put some money into a PIE fund (assuming you are above 28% tax bracket). Open a bunch of different bank accounts and easily transfer money to the bank that has the best deal atm. I have an account with Squirrel for oncall (above 5% return), as well as one with Rabobank, Heartland and of course the big banks like ANZ/ASB, etc.

  I also used to buy and sell stuff based on current trends. I check Cheapies for pricing errors and bulk buy stuff that I think people will want, like PS5s or whatever during the peak demand period. Yes, I'm a scalper, but hey that's an investment strategy.

  Another type of investment is in yourself. If for example you work in IT, get a bunch of useful certifications and upskill to get to a high level and earn a good salary. I make around 250K in salary atm and it's nothing compared to what AI engineers make (at least 500K~1mil). So now, I'm learning data engineering, machine learning and creating solutions with OpenAI APIs. Already have made a couple of cool and useful tools that I might sell, but need to work out how to monetize and better protect my IP from being reverse engineered or cracked by hackers/modders.

  Oh and I also buy a bit of gold here and there as well.

  Kinda investment related, but ride the AI hype train and try to get a product out. People have been using GPT tools to create children storybooks and use Midjourney or whatever to generate images for the books. Then they put it up on Amazon to sell. That's just one idea. There's still a pretty high demand of storybooks in China and other countries, so consider spending the time to form some ideas.

  It's good to invest in different things, but with volatile options such as stock and crypto, nobody really knows how the market works, not even those guys at Wall Street. There's always a bit of uncertainty to them. Unless you're absolutely sure what you're doing. Invest with an amount that you're comfortable with losing. That amount will of course depend on how well your current financial situation is and generally affected by the salary you make in the first place. This is why it's important to make sure you invest in yourself as well, as you can always get back up on your feet if you earn a high salary.

  And once you've reached a certain level of wealth, perhaps hire and have a chat with a financial advisor. And get a good accountant. They can provide with quite a lot of good advice that you normally wouldn't have thought of.

  Lastly, buy a bit of lotto every now and then. For fun and also who knows, you might end up retiring way earlier than you think. Just don't turn it into a gambling addiction.

  • 

    Aerol on 01/01/2024 - 08:37

    Curious what area of IT you're working in atm and whether it's for an NZ company or overseas company? My current area is cloud (specifically Azure) and I'm considering overseas for my next gig to crack the big salaries.

    • 

      NovaAlpha on 01/01/2024 - 12:55

      +1

      DevSecOps. Work in NZ atm but thinking of working for overseas as well