Asset allocation plan for starting out

Me again - figured I should start a new thread :)

I have been reading (so many book suggestions to work my way through!) and learning a lot. Currently reading Martin Hawe's "Investment Guide" and finding it really useful.

Everything I've read so far talks about the importance of asset allocation and diversity within each allocation. All of which makes perfect sense to me - I understand it. However, I'm wondering how best to achieve this given my newbie status and the small amount of capital I currently have to invest. I don't believe I currently have enough cash assets to invest in debt assets (bonds or cash) and I clearly don't have enough to invest in property. Which leaves shares. Having dipped my toe in the water with my Kingfish purchase I now need to figure out what the next move should be. I've looked at putting a couple of grand into Term Deposits or Managed funds with either of my banks (ASB and RaboDirect) but I'm not convinced this is the way to go. Rabo has no dividend reinvestment funds so for me, that defeats the purpose. They also have a minimum deposit of $250 for a regular monthly investment which may be doable some months, but not every month.

I guess what I'm asking is - with a small amount of capital and a lower capacity for savings, is it viable for me to spread my investments across areas other than shares at this point in time? Am I better at this stage to drip feed what I can save, into a variety of shares (focus on solid companies with decent dividends and reinvestment plans) to build up a decent little portfolio - and just keep a couple of grand in the bank for emergencies? I realize this is kind of putting all my eggs in one basket but I'm just not sure how best to get out of the starting gates with my overall plan.

Right now I still have $6000 in the bank (after my share purchase) - How do I spread the risk with such a small amount of money?

It might seem that I've "got the bug" and now want to go buying shares all over the place. I really don't. I just want to come up with a basic plan for "where to from here" to keep the momentum up in terms of finally being proactive with my finances.

As usual any comments, suggestions, feedback gratefully received .

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Originally Posted by justakiwi

Me again - figured I should start a new thread :)

I have been reading (so many book suggestions to work my way through!) and learning a lot. Currently reading Martin Hawe's "Investment Guide" and finding it really useful.

Everything I've read so far talks about the importance of asset allocation and diversity within each allocation. All of which makes perfect sense to me - I understand it. However, I'm wondering how best to achieve this given my newbie status and the small amount of capital I currently have to invest. I don't believe I currently have enough cash assets to invest in debt assets (bonds or cash) and I clearly don't have enough to invest in property. Which leaves shares. Having dipped my toe in the water with my Kingfish purchase I now need to figure out what the next move should be. I've looked at putting a couple of grand into Term Deposits or Managed funds with either of my banks (ASB and RaboDirect) but I'm not convinced this is the way to go. Rabo has no dividend reinvestment funds so for me, that defeats the purpose. They also have a minimum deposit of $250 for a regular monthly investment which may be doable some months, but not every month.

I guess what I'm asking is - with a small amount of capital and a lower capacity for savings, is it viable for me to spread my investments across areas other than shares at this point in time? Am I better at this stage to drip feed what I can save, into a variety of shares (focus on solid companies with decent dividends and reinvestment plans) to build up a decent little portfolio - and just keep a couple of grand in the bank for emergencies? I realize this is kind of putting all my eggs in one basket but I'm just not sure how best to get out of the starting gates with my overall plan.

Right now I still have $6000 in the bank (after my share purchase) - How do I spread the risk with such a small amount of money?

It might seem that I've "got the bug" and now want to go buying shares all over the place. I really don't. I just want to come up with a basic plan for "where to from here" to keep the momentum up in terms of finally being proactive with my finances.

As usual any comments, suggestions, feedback gratefully received .

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IMV Its often better to hone your skills at identifying higher return assets rather than diversifying too much.Remember you are starting to invest late in life.What is your goal?To get to retirement with no,reasonable or moderate savings.If your portfolio is too diversified it will often lower its return.
If you want to drip feed small amounts it may be better to drip feed into something like Milford Growth fund which is PIE(tax paid) until you have an amount that you can withdraw and are happy to invest say $5000 in a share that you have identified that will grow in value.Then build up another $5000 and invest in another one.

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Originally Posted by justakiwi

I've looked at putting a couple of grand into Term Deposits or Managed funds with either of my banks (ASB and RaboDirect) but I'm not convinced this is the way to go. Why not?

Rabo has no dividend reinvestment funds so for me, that defeats the purpose. This can be worked around They also have a minimum deposit of $250 for a regular monthly investment which may be doable some months, but not every month. THEY DONT HAVE A MINIMUM DEPOSIT THOUGH?

I guess what I'm asking is - with a small amount of capital and a lower capacity for savings, is it viable for me to spread my investments across areas other than shares at this point in time? YES


Am I better at this stage to drip feed what I can save, into a variety of shares (focus on solid companies with decent dividends and reinvestment plans) to build up a decent little portfolio - and just keep a couple of grand in the bank for emergencies? Only if you choose to avoid proper asset allocation

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my comments in red

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Originally Posted by kiora

IMV Its often better to hone your skills at identifying higher return assets rather than diversifying too much.Remember you are starting to invest late in life.What is your goal?To get to retirement with no,reasonable or moderate savings.If your portfolio is too diversified it will often lower its return.
If you want to drip feed small amounts it may be better to drip feed into something like Milford Growth fund which is PIE(tax paid) until you have an amount that you can withdraw and are happy to invest say $5000 in a share that you have identified that will grow in value.Then build up another $5000 and invest in another one.

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My most basic goal right now (the very least I hope to achieve) is a long term return on my savings that is better than leaving it in the bank. I would also hope to make sufficient growth over the next 10 years to end up with a solid investment to sit alongside my Kiwisaver when I retire. If my investment grew enough for me to dip into it down the track (prior to retirement) for something like a holiday in Rarotonga - that would be a bonus.

I'm realistic. I know I'm a very late starter and I know I'm not going to make bucket loads of money. I just can't sit here watching my savings languish at 3% interest any longer.

Thanks for the Milford Growth suggestion. I did have a quick look at that one and I'm definitely not ruling PIE funds out. I was thinking more of working towards accumulating $1000 at a time (then investing) though, as that's more realistic for my situation than waiting till I've saved $5000.

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Originally Posted by peat

I guess what I'm asking is - with a small amount of capital and a lower capacity for savings, is it viable for me to spread my investments across areas other than shares at this point in time? YES

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OK, so do you have any suggestions as to how I might best do that?

Here's my current system, maybe something similar could work for you?

If I have a large amount of spare cash (a few thousand $), I buy shares. They are riskier but have offered the best returns for me.

For smaller amounts of spare cash (1-2 thousand) or if nothing interests me in the sharemarket, I'll put some in Squirrel Money, and some in a savings account to build up funds to buy shares. Drip feeding into Rabo's managed funds or smartshares ETFs could also work for these amounts of money.

For tiny amounts of spare cash (a few hundred) I put in Lending Crowd.

I've also got some RaboDirect Managed funds which I'm slowly selling (don't wanna pay 1-2% management fees when I have managed to do a lot better picking my own shares).

Rule 1: Only put your money on the share market if you could afford to lose it!

Rule 2: Will lose some sleep or depress if your investment goes down 50 or 75%? For example: WYN or IQE..it could happen to anyone....What will you do if your investment down like that as a new bee?

Rule3: Share market is harsh, need a lot of researching!! People got greedy and caught in the hype. If you expecting people here to advise you where you should put your money,,,then good luck..as no one will be able to do that.

Rule4 : Good luck!!! hope you find your way!! I did find my way....learnt from mistake with quite a bit of trading to start with. Made losses but also profits!

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Originally Posted by Kelvin

Here's my current system, maybe something similar could work for you?

If I have a large amount of spare cash (a few thousand $), I buy shares. They are riskier but have offered the best returns for me.

For smaller amounts of spare cash (1-2 thousand) or if nothing interests me in the sharemarket, I'll put some in Squirrel Money, and some in a savings account to build up funds to buy shares. Drip feeding into Rabo's managed funds or smartshares ETFs could also work for these amounts of money.

For tiny amounts of spare cash (a few hundred) I put in Lending Crowd.

I've also got some RaboDirect Managed funds which I'm slowly selling (don't wanna pay 1-2% management fees when I have managed to do a lot better picking my own shares).

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Hey thanks for that. Squirrel Money and Lending Crowd look really interesting. My initial reaction is to feel a bit nervous about P2P lending, but I will definitely have a closer look.

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Originally Posted by King1212

Rule 1: Only put your money on the share market if you could afford to lose it!

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I agree with that.

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Rule 2: Will lose some sleep or depress if your investment goes down 50 or 75%? For example: WYN or IQE..it could happen to anyone....What will you do if your investment down like that as a new bee?

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I totally understand this and I'm OK with it. I'm looking at investing in shares long term, not trying to make a quick buck buying and selling.

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Rule3: Share market is harsh, need a lot of researching!! People got greedy and caught in the hype. If you expecting people here to advise you where you should put your money,,,then good luck..as no one will be able to do that.

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I know that :) I am simply looking for ideas and information from people who have already "been there done that" - it's a good way to learn alongside other types of researching and information seeking.

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Rule4 : Good luck!!! hope you find your way!! I did find my way....learnt from mistake with quite a bit of trading to start with. Made losses but also profits!

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Thanks!

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Originally Posted by justakiwi

Hey thanks for that. Squirrel Money and Lending Crowd look really interesting. My initial reaction is to feel a bit nervous about P2P lending, but I will definitely have a closer look.

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Not an uncommon feeling to feel nervous about P2P. I put the minimum $500 in (that I could afford to lose) to test it out when I first started. The return you get does compensate for the risk though, and getting monthly payments is nice.

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Originally Posted by Kelvin

Not an uncommon feeling to feel nervous about P2P. I put the minimum $500 in (that I could afford to lose) to test it out when I first started. The return you get does compensate for the risk though, and getting monthly payments is nice.

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Is 2 years the minimum term available? I see with Squirrel you can sell your investment if you have a financial emergency or whatever, but wondering how hard it would be to get someone to buy it given that they may be able to get a higher interest rate than what you're trying to sell.

The bellow link is an NZ author's perspective on risk and investments.

FYI she's dead against investing in individual shares.. But it may help you work through your asset allocation queries.

http://www.rbnz.govt.nz/-/media/Rese...-investors.pdf

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Originally Posted by huxley

The bellow link is an NZ author's perspective on risk and investments.

FYI she's dead against investing in individual shares.. But it may help you work through your asset allocation queries.

http://www.rbnz.govt.nz/-/media/Rese...-investors.pdf

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I like the bit "Fortune favors the brave" & Risk vs return & add fear & greed.Best to learn from experience?

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Originally Posted by justakiwi

Is 2 years the minimum term available? I see with Squirrel you can sell your investment if you have a financial emergency or whatever, but wondering how hard it would be to get someone to buy it given that they may be able to get a higher interest rate than what you're trying to sell.

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Yes, that's the minimum term. I wouldn't invest in P2P if there was a chance you needed the funds before the term ended, but the secondary market is still really nice to have. As long as you invest in small amounts and at a decent rate, I think it will be fairly easy to sell your investment - right now there are over $100,000 of investor funds bidding for 5 year loans, but a $15,000 loan at 8% untouched on the secondary market

If you want diversification with low amounts of money, hard to go past the Smartshare EFT. You can do a regular monthly deposit without facing brokerage. Since its an EFT, you wont beat the market, but your returns should roughly be the market return which will hopefully be more than the bank over the long term. As your fund builds up, you could sell some and invest in companies that you think will beat the index. That is pretty much want active funds do. Their funds look kind of like the index but are overweight in companies they think are good and underweight in companies they think are bad (I know this is a gross oversimplification).

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Originally Posted by Harvey Specter

If you want diversification with low amounts of money, hard to go past the Smartshare EFT. You can do a regular monthly deposit without facing brokerage. Since its an EFT, you wont beat the market, but your returns should roughly be the market return which will hopefully be more than the bank over the long term. As your fund builds up, you could sell some and invest in companies that you think will beat the index. That is pretty much want active funds do. Their funds look kind of like the index but are overweight in companies they think are good and underweight in companies they think are bad (I know this is a gross oversimplification).

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yeah, I keep coming back to ETF as possibly my "next step" best option for now. I have looked at all the funds they have available and my problem is now, knowing which one to choose (should I go down that path). Given that my little Kingfish holding is NZ shares, I'm thinking I should go with something international with Smartshares. I honestly have no real clue which funds I should consider, or which one to go with. I know this isn't a place to get advice on what to do, but could you offer some guidance around how I should make that decision?

Not wanting to step in to a private conversation but since this is directed towards a more philosophical question..as to how any of us make decisions. Sort of depends on what you feel most at home with. Some analyse things out to ne "n" th degree while others just go with the gut. However rather than treating this exercise as being a terminal, never to be recovered from position, one option is to do the buffet and try a little of this and a little of that and give it some time to digest. Even though you are 'older" than some, you still have plenty of time left. Its impractical and too daunting to try and make the "right" decisions right at the beginning of a journey..more important to just get started and trust that you can feel you way along gradually.

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Originally Posted by justakiwi

yeah, I keep coming back to ETF as possibly my "next step" best option for now. I have looked at all the funds they have available and my problem is now, knowing which one to choose (should I go down that path). Given that my little Kingfish holding is NZ shares, I'm thinking I should go with something international with Smartshares. I honestly have no real clue which funds I should consider, or which one to go with. I know this isn't a place to get advice on what to do, but could you offer some guidance around how I should make that decision?

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Originally Posted by BIRMANBOY

Even though you are 'older" than some, you still have plenty of time left. Its impractical and too daunting to try and make the "right" decisions right at the beginning of a journey..more important to just get started and trust that you can feel you way along gradually.

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Thank you for this. I guess right now, because I'm on my own (divorced and no significant other) I don't have anyone to bounce ideas off so you guys are the best alternative I've found so far.

I know I'm posting a lot and possibly running the risk of being labelled as somebody who "wants us to make decisions for her" - but aside from reading and researching online, these forums are the next best way for me to learn and get some general guidance. Plus right now as a newbie, I feel safer in this forum than venturing into the others - they are a bit scary ;)

Absolutely FINE...you do what works for you and I'm sure there is no such thing as posting TOO much. Some posters are into the tens of thousands ..it all comes down to what you feel ok with so post away:) do it at your own pace and in your own time.

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Originally Posted by justakiwi

Thank you for this. I guess right now, because I'm on my own (divorced and no significant other) I don't have anyone to bounce ideas off so you guys are the best alternative I've found so far.

I know I'm posting a lot and possibly running the risk of being labelled as somebody who "wants us to make decisions for her" - but aside from reading and researching online, these forums are the next best way for me to learn and get some general guidance. Plus right now as a newbie, I feel safer in this forum than venturing into the others - they are a bit scary ;)

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Originally Posted by justakiwi

yeah, I keep coming back to ETF as possibly my "next step" best option for now. I have looked at all the funds they have available and my problem is now, knowing which one to choose (should I go down that path). Given that my little Kingfish holding is NZ shares, I'm thinking I should go with something international with Smartshares. I honestly have no real clue which funds I should consider, or which one to go with. I know this isn't a place to get advice on what to do, but could you offer some guidance around how I should make that decision?

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giving specific advice is hard as it is very unlike to be the best advice (only possible with hindsight). For just plain diversification, I would normally say start with FNZ. No international but fine for a starting point. However you already have Kingfisher covering the NZ market (on an active basis) so you might want to go for OZY. That adds in Forex risk but does give you exposure to other things such as banks and resources. I think the new international ones (like the S&P500 one) are expensive for what they are but would give you diversification in the US market. Or since you want diversification, why not a regular $50 (or whatever the minimum/what you can afford) into each of OZY and the S&P500 one.

That might mean each one grows slowly as what i would aim for is to get one to grow to say $10k, then sell down $5-8K worth to put into a stock you think will beat the market. You will keep contributing to the EFT and that will build up again at which point you do it again. After a while, you will have an EFT and a handful of shares you have researched and think will do well.

That is kind of how I started (no EFT at the time so did managed funds) and now just have a diversified portfolio of 15+ NZ shares (and Kiwisaver for international).

What about this?

https://comms.anz.co.nz/termdeposit/...A-td_gold-Q416

:/

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Originally Posted by huxley

What about this?

https://comms.anz.co.nz/termdeposit/...A-td_gold-Q416

:/

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Minimum investment $10,000 - not quite doable yet ;)

I did look at RaboDirect's new Notice Saver - currently 3% (but variable) locked in for 60 days. But I decided there's no real advantage to the Premium Saver I already have with them. If the 3% was fixed it would be a different story.

Sadly, nobody seems to do Term Deposits with compounding interest anymore. They used to be a good option.

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Originally Posted by justakiwi

Minimum investment $10,000 - not quite doable yet ;)

I did look at RaboDirect's new Notice Saver - currently 3% (but variable) locked in for 60 days. But I decided there's no real advantage to the Premium Saver I already have with them. If the 3% was fixed it would be a different story.

Sadly, nobody seems to do Term Deposits with compounding interest anymore. They used to be a good option.

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You may want to double check that I'm pretty sure you can usually compound quarterly - good luck!

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Originally Posted by huxley

You may want to double check that I'm pretty sure you can usually compound quarterly - good luck!

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or just get it paid back into a cash account that accumulates until enough for another instance of a term deposit, all the time varying the duration to suit the portfolio.


I think Rabo is perfect for managing smaller portfolios and yet also allowing appropriate asset allocation to be achieved.

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Originally Posted by peat

or just get it paid back into a cash account that accumulates until enough for another instance of a term deposit, all the time varying the duration to suit the portfolio.


I think Rabo is perfect for managing smaller portfolios and yet also allowing appropriate asset allocation to be achieved.

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I have been looking again at Rabo's managed funds and thinking these might be a good option for a small starting investment but I am overwhelmed by the choices and have no clue which fund would be the best, or even a good, option. Some of the providers I've never heard of such as Elevation Capital, Devon Funds, Harbour Asset Management. How on earth is one supposed to learn how to judge these? Or am I overthinking it - should I trust that RaboDirect has a good reputation and "assume" that they would only choose quality providers and therefore funds?

At this point I am prepared to invest another $1000 somewhere - the question is, a Smartshares ETF such as OZY or a Rabo (provider X) managed fund.

How do people ever figure all this stuff out? ;)

OK, I stumbled across a documentary video by a guy called Mark Hebner, titled "Index Funds: The 12 step recovery program for active investors." I haven't yet watched it all, but so far this guy makes perfect sense and I like what he has to say. Based on what I've seen/read so far, I think ETF is the right option for me as a small investor, looking for long term growth and a bit more stability/safety than active investing. At least for now.

So I'm looking again at Smartshares. I've just been looking at their website to see whether it's better/cheaper to invest directly via them or via ASB Securities and from what I can see it seems that buying directly from them is definitely cheaper. I read this:

" When Unitholders first subscribe for Units they will pay an application fee
to the Manager which will be deducted from their subscription amount. For subscription amounts of less than $20,000 this will be a flat fee of $30, and for subscriptions equal to or greater than this amount the subscription fee will be 0.2% of the subscription amount. This fee is not payable for subsequent Cash Applications, subscriptions under the Regular Savings Plan, or the Distribution Reinvestment Plan."

So if I am reading this correctly, I would pay the same $30 fee to purchase as I would if I did it through ASB, but if I then wish to make additional cash purchases or regular monthly purchases, I won't be charged anything - as opposed to making additional purchases through ASB which would cost be another $30 each time.

Correct? Are there any disadvantages of buying directly through Smartshares that anybody can see that I'm missing?

Oh, and how do I know what the price of a unit is if I buy through Smartshares?

I believe that there is an element of confusion in your thinking here.

When you buy Smartshares through ASBSec you are always buying existing units up for sale on the NZX and thus you always pay their minimum $30 brokerage.

When you buy Smartshares directly from SmartsharesCo you are buying new units created for you whether this is your initial entry (when you pay the SmartsharesCo $30 fee) or subsequent top-ups (with no fees).

Come the time that you want to sell your Smartshares, if SmartsharesCo do not offer a buyback facility then you will need to sell them on the NZX via ASBSec (or another broker).

Are you intending to make regular monthly payments?

Best Wishes
Paper Tiger

it makes sense to skip out any middleman who isn't adding value (such as providing advice...)
the price of the units is on their website , they simply accept dollar value applications.
. The only thing I noted that was out of the ordinary was that they 'work' the shares owned by the funds. By that I mean they reserve the right to lend them out to earn further income and this is all completely kosher but not explicitly outlined. I don't use Smartshares myself but have read up on them and communicated with them in 2010 regarding this issue, which was clarified to me as so:

In relation to securities lending the amendments to theTrust Deeds contemplate two types of permissible lending:1. Lending through a central clearing house; and

2. Lending to NZX marketparticipants bilaterally

Its not a big deal, and they did clarify that they wouldn't be taking on any option writing strategy where risk is retained. So in effect its adds to the yield or reduces the management fees whichever way you want to see it

So using Smartshares still requires you to make a choice though ! I see 23 of them now.
Attachment 8243

Obviously you will want to choose a diverse option as opposed to say 'Australian Resources' or 'Emerging Markets', but that still leaves heaps to pick from. Do you want to choose NZ, or Aussie, or US? And if so the top 10 or 20 or 50. It is a bit bewildering. Theoretically you should choose the 'Total World' for the most diversification but I find my self irrationally disliking that option.
Have fun selecting.

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Originally Posted by Paper Tiger

I believe that there is an element of confusion in your thinking here.

When you buy Smartshares through ASBSec you are always buying existing units up for sale on the NZX and thus you always pay their minimum $30 brokerage.

When you buy Smartshares directly from SmartsharesCo you are buying new units created for you whether this is your initial entry (when you pay the SmartsharesCo $30 fee) or subsequent top-ups (with no fees).

Come the time that you want to sell your Smartshares, if SmartsharesCo do not offer a buyback facility then you will need to sell them on the NZX via ASBSec (or another broker).

Are you intending to make regular monthly payments?

Best Wishes
Paper Tiger

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Thanks for clarifying that for me. Re the regular monthly payments, yes that is what I'm currently thinking. Minimum initial order is $500 - which means $530 including their fee. I think I will start with that, register for DRIP straight away, then set up a regular monthly payment of $50 (which is the minimum). Right now, that is doable for me. The good thing is - if my situation changed for the worse - you can pull out of the regular investment plan or reduce the frequency - which is good to know. It means I can be in control of what I'm investing on a regular basis without being tied to anything. I like that.

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Originally Posted by peat

it makes sense to skip out any middleman who isn't adding value (such as providing advice...)
the price of the units is on their website , they simply accept dollar value applications.
. The only thing I noted that was out of the ordinary was that they 'work' the shares owned by the funds. By that I mean they reserve the right to lend them out to earn further income and this is all completely kosher but not explicitly outlined. I don't use Smartshares myself but have read up on them and communicated with them in 2010 regarding this issue, which was clarified to me as so:

In relation to securities lending the amendments to theTrust Deeds contemplate two types of permissible lending:1. Lending through a central clearing house; and

2. Lending to NZX marketparticipants bilaterally

Its not a big deal, and they did clarify that they wouldn't be taking on any option writing strategy where risk is retained. So in effect its adds to the yield or reduces the management fees whichever way you want to see it

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I think I understand that but will read it at least four more times to make sure ;)

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So using Smartshares still requires you to make a choice though ! I see 23 of them now.
Attachment 8243

Obviously you will want to choose a diverse option as opposed to say 'Australian Resources' or 'Emerging Markets', but that still leaves heaps to pick from. Do you want to choose NZ, or Aussie, or US? And if so the top 10 or 20 or 50. It is a bit bewildering. Theoretically you should choose the 'Total World' for the most diversification but I find my self irrationally disliking that option.
Have fun selecting.

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Exactly! This is my present dilemma. I'm with you - I keep thinking "Total World" makes sense, but for some reason it's scaring me. Somebody (was it you?) suggested earlier that because I have Kingfish covering a little bit of the NZ side of things, I'd be best to look at OZY or US500(USF) which invests directly in the Vanguard S&P 500 ETF (VOO). I feel that that one might be a good choice in terms of diversification, but I'm only going on a gut feeling which could be dangerous as a beginner. Having said that, this one isn't cheap (for me) so I then have to decide whether I can accumulate enough units over time, for it to be a worthwhile option.

Open to suggestions/opinions as usual :)

Can somebody explain to me what "currency hedging" means (in layman's terms)? Is an ETF that is currency hedged a better choice than one that isn't?

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Originally Posted by justakiwi

Can somebody explain to me what "currency hedging" means (in layman's terms)? Is an ETF that is currency hedged a better choice than one that isn't?

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Depend's which way the currency goes.

If it is hedged, you get the return of the index. If it is unhedged, you get the combined return of the index and the foreign exchange movement.

So if the US index goes up 10%, but the NZD increases in value against the USD by 10%, your return is 10 for a hedged, but 0% for an unhedged.*

* I think I got that right and obviously there is a cost to an index fund and to a hedging policy so the returns aren't exact.

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Originally Posted by Harvey Specter

Depend's which way the currency goes.

If it is hedged, you get the return of the index. If it is unhedged, you get the combined return of the index and the foreign exchange movement.

So if the US index goes up 10%, but the NZD increases in value against the USD by 10%, your return is 10 for a hedged, but 0% for an unhedged.*

* I think I got that right and obviously there is a cost to an index fund and to a hedging policy so the returns aren't exact.

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Ah OK. So hedged would definitely be an advantage in that case. I can't seem to find any info re that around the Smartshares funds. Might have to dig a bit deeper.

It is a moo point (see video) whether currency hedging is of any benefit in long term regular investing as the gains and losses tend to even out over time and you are left with an extra expense diminishing overall returns.

https://youtu.be/fLwYpSCrlHU

Best Wishes
Paper Tiger

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Originally Posted by Paper Tiger

It is a moo point (see video) whether currency hedging is of any benefit in long term regular investing as the gains and losses tend to even out over time and you are left with an extra expense diminishing overall returns.

Best Wishes
Paper Tiger

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Joey and I think you're right ;)

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Originally Posted by justakiwi

Ah OK. So hedged would definitely be an advantage in that case. I can't seem to find any info re that around the Smartshares funds. Might have to dig a bit deeper.

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I don't think any of the smartshares have any currency hedging options

Moo!! Just as well we aren't talking about mootual funds
I agree that (at least ) not all overseas investments should be hedged.

Harvey said that about Kingfisher .... I tend to agree with what he's saying though.