Creating My Own NZX 50 Index Fund

[Hoop]

ETF's and other many all sorts of passive intruments become very popular with the "I'm not really an investor" investor at a very late stage of a booming market...

These sort of "investor" can end up dominating a fund and when the tide turns they scare easy and all scramble at once...therefore that fund has more potential for a hard landings than the overall market...Also be careful about "indexed" or "managed" investing with a private company, when the run begins you find out "those companies which have been swimming naked". ..It does happen ..ask a past Gold investor..

In saying this I'm not sure just how well you are protected using the Exchange itself (ETF)..Read the fine print if there is one. Unfortunately, when the market is hunky dory most perceive problems as something that "would never happen".

I've seen the popularity of passive type of investing wax and wane over the decades (only the names or the way it operated were/are changed) and I ask myself, "When was the last time this sort of stuff popular?"

I list "Ducks" a personal name I invented for listing conditions that pop up before a market cycle reversal (when all the ducks line up in a row)...Passive fund becoming hugely popular is one of my ducks

Please......before anyone decides to enter these managed type funds..do your homework in a practical non-emotional way (remove the rosy glow from your vision)

Please read this Seeking Alpha Article "The Passive Indexing Trap by Lance Roberts 25/4/2017, as a starting point

[blackcap]

The easiest way is to get a SmartShare.

Incidentally, the NZX50 inclusion is based on free float liquidity so the likes of Michael Hill International and Briscoes Group aren't in and then serial underperforming stocks like Fletcher Building and Spark make up a large component of the NZX50.

The Gentailers like Mercury, Meridian and Genesis saw most of their growth at IPO so again they are only there because of size as you'd expect modest capital growth as they are mainly yield stocks.

Also companies outside the Index gain when they enter because fund managers who track the index have to buy in to balance their funds... and when they drop out the stocks you see funds sell out.

Tracking the 50 means you get the average and a lot of fairly mediocre holdings because of the criteria and weighting of large stocks.

Fees on smartshares are atrocious as well when compared to overseas equivalent like Vanguard. (that said fees are under 1% so a lot better than the actively managed funds in NZ, but really could come down a bit on the Smartshares ones...

[RTM]

Please read this Seeking Alpha Article "The Passive Indexing Trap by Lance Roberts 25/4/2017, as a starting point

Thanks for this Hoop. A sobering read. It has been very easy to manage everything as stocks have been generally going up for the last 5 years or so, as long as you don't bet on a real dog. I wonder how some of us are going to manage when the market starts to go in the other direction ? I don't really use any financial advisor help...not really sure who I would trust / believe. Food for thought....

[sonny n share]

Mel 22% pa over last 24 months, and 20% over last 12 months is pretty good. Tho it has had its ups and downs.

You can pay much lower fees than smartshares if you buy ishares or vanguard directly but you have the complication of fif if you purchase over $50k. Also smartshares/superlife allows you to make small purchases at no fees. Yes it would be great if they dropped the fees!

We probably are all wondering when the next big dip will be!