This forum is called “Share Trader” which made me think about why we invest in the share market. I am curious to know why you all invest in shares? Do you consider yourself a “trader” with the aim to make a profit buying and selling? Are you an “investor” looking for long term returns? Someone wanting retirement income? Or just someone looking for a better place than banks to leave your money? Or a mix of some or all of the above?
Why do you invest in shares?
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10-08-2019, 11:42 AMjustakiwiWhy do you invest in shares?
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10-08-2019, 01:42 PMSBQ
If I had no overseas experience and background and just lived in NZ only knowing about NZ options for investment; then I would only invest in NZ real estate. For the simple reason of tax free capital gains.
You should see what people do for retirement & investment planning in N. America. It makes NZ look like a joke, seriously Kiwi Saver? A vehicle of retirement planning where the managed funds pay tax on their gains annually + mgt fees? In Canada registered accounts compound TAX FREE every year. Upon drawing funds out of the portfolio / account, then you pay the tax on the gains. Want to sell $20K or $200K of stocks is entirely up to you to reflect your level of income on that year. Because in Kiwi Saver what point is being at age 70 with an account that has grown little despite withdrawals are tax free?
Hence, the key reason why NZ real estate is still the #1 form of investment for people in NZ. If Jacinda had put in capital gains tax in NZ, then perhaps capital would flee from NZ. She must of figured this out so called off the CGT despite the TWG advising NZ should have CGT. -
10-08-2019, 02:25 PMSnow LeopardFor me, the short answer is "Yes" to all.Quote:
Originally Posted by justakiwi
Historically I have been a long term investor looking for the best total returns of capital growth plus dividends but when time and circumstances have allowed I have engaged in a little trading. Having generally out-performed the markets over the years it has been something worth spending my time on.
Since the start of this year investing is the sole source of income for my partner and I.
Given that our primary goal is to travel as much as we can while we can combined with the current environment of low interest rates and generally high stock valuations I am currently of the opinion that it will be necessary to adjust to a different, more short term style of investing/trading, in the next few years and accept that there will times of drawing down on our capital. -
11-08-2019, 11:03 AMG on
Started 2011 buying shares through ASB as had too much in term deposits, good % interest tho, and in nothing else. Considered that I had too little spread of money after selling a property. Just in case interest rates dropped!! Ceased working so was more focused on passive income that possibly people still working. Now 62. NZ companies paying good dividends mostly at the time so kept the passive income quite reliable. Currently net wealth spread between house, term deposits and shares equally. Good amount of cash that should cover living for at least 12 months as well.
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11-08-2019, 08:25 PMJBmurc
I First had a interest in shares couple years after I left school and was enticed to make more than my savings account was giving ... as you did 15yrs+ ago I went to a broker Craig & Co ...
where I got a taste of the idea of making big capital gains (well thats what I was sold by the broker) fact was the shares he pushed me did woeful , so I pulled the funds and went my own way thanks to "Access brokerage" which was brilliant to give me the trading bug ... ended up doubling my funds first year invested and doing pretty well the second year ... no long after accountant talked me into setting up a company and becoming a tax paying trader.
I really enjoy share trading and doing my best to reach my 100%pa goal I even use borrowed funds to leverage my returns
I do plan to build another seperate portofilo of my own capital with the focus of long term investment chasing yield over Cap gains. -
11-08-2019, 09:49 PMkiora
Definitely consider myself as an investor.I like the liquidity of shares but typically set & forget.
Trading takes too much time & energy
I remember the days
https://www.nzherald.co.nz/indepth/b...-market-crash/
Dibbled in residential property but again takes too much time & definitely wouldn't consider it for retirement
Do have rural property but its not liquid and needs very long 20 + years investment horizon.Just as much a hobby as an investment. -
11-08-2019, 09:54 PMjustakiwi
Thanks everyone. Really interesting reading all your comments :)
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12-08-2019, 10:16 AMPipi
I invest to give myself long term financial security. Long term goal is to have passive income. I started investing into individual shares, some were good some bad. But just don't have the time to spend doing the research. So I now have set AP's that go to Smartshares, Investnow and Sharesies each month. This is working great for me. I make sure there is enough money each month for when the AP's need to go out, so it has been good compulsory savings. My number 1 rule, is to never touch the capital I have put in. I also intend at the next financial dip to put more in.
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12-08-2019, 10:51 AMjustakiwi
So are you investing in ETFs via these three?
Quote:
Originally Posted by Pipi
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12-08-2019, 10:57 AMwinner69
There was a woman on the radio the other night who asked her friend why she has a long overseas trip every here - her friend says she has shares
So the woman said she knew nothing about shares (completely ignorant she said) but rang up a sharebroker and said I need to get some shares so I can have an overseas holiday every year.
She said she gave the sharebroker $100,O00 to buy shares and rings him up once a year to get $10,000 to go an overseas trip.
She’s got no idea what shares she has but the main thing is ‘she has shares’ and gets enough cash for an annual overseas trips. One lucky punter
That’s why that woman invests in shares -
12-08-2019, 11:09 AMTronald DumpSBQ, I think you've been misinformed. You don't pay any capital gains tax on shares in NZ if they're held in a PIE fund (which pretty much all NZ based managed funds, ETFs and Kiwisaver funds are), or if you're classed as a long term investor rather than a trader.Quote:
Originally Posted by SBQ
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12-08-2019, 11:40 AMPipiYes I have, only 1 with Smatshares, most of them with Investnow and a few with Sharesies to have a play.Quote:
Originally Posted by justakiwi
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12-08-2019, 11:57 AMjustakiwi
I’m pretty impressed with Sharesies so far. Great option for beginners.
Quote:
Originally Posted by Pipi
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12-08-2019, 12:08 PMPipiYes it is. I find it quite addictive too, you can buy small parcels of shares and have them that day, wow. I also have my 13 year old daughter put $30 out of her pocket money into sharesies once a month. I'm hoping it is something she will get into the habit of and keep doing for the rest of her life.Quote:
Originally Posted by justakiwi
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12-08-2019, 01:53 PMSBQFrom the individual IRD tax resident's point of view, correct. But from the whole picture point of view, the PIEs and various NZ operated fund managers, Kiwi Savers, etc. pay the tax on their gains and incomes annually. These actively managed funds are essentially 'traders' and by definition, all their short term gains made are taxable. This is a HUGE difference to the managed funds in N. America where under registration, and work in with a employee payment contribution plan (like Kiwi Saver), the daily trades these funds operate do NOT pay any taxation whatsoever. What makes it more compelling is the gains are compounded tax free year after year until the where the client chooses to make a withdrawal, then a sale is made and capital gains is elected to pay tax on. As I mentioned before, it's far more elegant for the senior retired person to choose HOW MUCH they want to pay in tax each year by according to their lifestyle. Not a system where in NZ, investors are stuck indirectly paying tax every year in these managed funds regardless of their financial situation (young or old).Quote:
Originally Posted by Tronald Dump
Now to keep on topic, it's clear that NZ investors into shares directly or in a managed fund, are at a clear tax disadvantage than those living in Canada or in the US. Also it makes it hard to have shares as a great investment when alongside, we have NZ real estate that gets the tax free tick for the long haul investment.
Again, find me some figures where Auckland real estate has done worse than NZ shares (NET OF TAXES and or mgt / admin fees) in the past 10 years? I've seen some graphs in the past where shares have done better than NZ real estate but none that include taxation on the share gains and the RWT on dividends 'net' of returns. While I often hear those that have gone into Kiwi Saver complaining that they're not getting the expected compounded returns as they intended; mostly on part because they chose the wrong investment category (ie. aggressive / conservative mix with term deposits lol). -
12-08-2019, 05:20 PMTronald DumpNo, this is simply not correct. In a PIE fund, any capital gains made in shares in New Zealand resident companies and Australian resident companies that are listed on an approved Australian Stock Exchange index and maintain a franking credit account, are not taxable.Quote:
Originally Posted by SBQ
For investments in offshore equities PIE funds apply the “fair dividend rate” (FDR) method to calculate the amount ofany taxable income. Under the FDR method, the funds will generally have taxable income ineach income year (1 April to 31 March) in relation to the applicable equities calculated byreference to 5% of the average daily opening market value of the applicable equities. Dividendsor sales proceeds received by the funds in relation to the applicable equities should not besubject to further tax. The funds may be entitled to a credit for any foreign withholding tax paidon dividends received from the applicable equities subject to certain limits. No tax deductionmay be claimed for any losses in respect of the applicable equities under the FDR method. If you're a 28% taxpayer therefore, you'll pay 1.4% p.a. in tax, regardless of whether the fund makes -5% or +20%, so it's hard to call it a capital gains tax.
The only index-tracking NZ equity share fund with a 10 year record has returned 13.7% p.a. net of fees/pre tax over the last 10 years to 31/07/19. I don't have the numbers for Auckland real estate (they are amazingly hard to get hold of on Google) but I would be surprised if net of tax on income, maintenance, repairs, insurance, rates etc. they are close to comparable. -
12-08-2019, 07:05 PMSBQ:huh: duh i'm not speaking for NZ resident companies or those in Australia that are FIF exempt. Afterall the previous posts i've been getting at is around investing foreign shares that fall under FIF and it's a serious concern or risk if you ask NZ investors that they should be buying NZ stocks when the NZX equity market may represent less than 1% of the global equity market. I blame Michael Cullen for this because he's been h*ll bent on coercing NZ investors to favour NZ shares over foreign shares since he pushed through FIF.Quote:
Originally Posted by Tronald Dump
Spare the FIF talk, I think readers are well aware the tax treatment of shares under FIF is unfair to shares that are excluded to FIF. Primarily because the treatment of FIF is to tax paper gains which again, Mr Cullen wanted to address that NZ investors had a clear advantage to investing in US equities because their model focusses on capital gains with little or no dividend payment (while in NZ, it's the opposite). I've been very crtical about this in many of my past posts on different threads and when you look for retirement planning, there's no worse way to erode the compound returns of the retirement portfolio than to pay 1) High mgt & admin fees by the funds 'ETF or not', and 2) Be slapped with FIF despite how it may only be 1.9% (those on the 38% tax bracket). and let's all not forget, under FIF there is NO tax credit on years when your portfolio goes negative, so when the market rebounds in the following years, FIF will cane the portfolio as it tries to recover it's value.Quote:
For investments in offshore equities PIE funds apply the “fair dividend rate” (FDR) method to calculate the amount ofany taxable income. Under the FDR method, the funds will generally have taxable income ineach income year (1 April to 31 March) in relation to the applicable equities calculated byreference to 5% of the average daily opening market value of the applicable equities. Dividendsor sales proceeds received by the funds in relation to the applicable equities should not besubject to further tax. The funds may be entitled to a credit for any foreign withholding tax paidon dividends received from the applicable equities subject to certain limits. No tax deductionmay be claimed for any losses in respect of the applicable equities under the FDR method. If you're a 28% taxpayer therefore, you'll pay 1.4% p.a. in tax, regardless of whether the fund makes -5% or +20%, so it's hard to call it a capital gains tax.
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The only index-tracking NZ equity share fund with a 10 year record has returned 13.7% p.a. net of fees/pre tax over the last 10 years to 31/07/19. I don't have the numbers for Auckland real estate (they are amazingly hard to get hold of on Google) but I would be surprised if net of tax on income, maintenance, repairs, insurance, rates etc. they are close to comparable.
Did you forget to mention this particular NZ fund with that track record? As Warren Buffet said, there are plenty of funds that can show year after year their stellar returns but can they repeat the same returns in the next decade? There's also a level of (well lack of transparency) as i've found many of these NZ managed funds with many bold claims, but they don't report 'net' of taxes and net of admin fees. Hence why we often see the figures are unaudited and full of window dressings. As for Auckland real estate gains, the problem lies on leveraging. My cousin bought a small 2 story dump in New Market for about $400K back in 2006. Last year they sold it for a whopping $1.4M. Yes you could argue a person could of done equally as well by buying the NZX50 but the stark reality is this. VERY VERY Few investors would consider to leverage buying (on the margin or by mortgage loan) of that size on shares. Because the home mortgage rate is always going to be a lot less than the NZ broker rate for margin accounts or bank loans that don't take NZ listed shares as collateral; and thus the bank lending rate will be higher. So why is it that we have a banking industry that promotes people to go mortgage to buy their home, but none of them promote leveraging in the same way when it comes to buying NZ listed shares? I tell you why, it's because the banks know they have control of hard assets like land and houses but a person to ask the bank to lend on an asset where it's share price can go to zero? They will kindly show you the door. (remember, i'm speaking from a person that has no real collateral in ie. buying their 1st home). Second, if you think mainentance, repairs, insurance, rates is a big deal, it certainly isn't. Take a $1.5M figure for an Auckland house, add up the rates, insurance etc.. and we're only seeing around 1% for the cost of outgoings of the asset. Less than most NZ managed funds would charge and certainly a lot less if FIF was added to the cost. Comparable?
On a slightly side topic, and again i'm speaking from a Canadian perspective. I'm a bit at a crossroads between the NZ approach to investing vs what I was taugh about finanace at uni in Canada. I'm not sure if it's because NZ is behind from the rest of the world or that the NZ gov't just doesn't care. In Canada for as long as I can remember, the gov'ts and tax dept have been very clear that the asset class of real estate is not one you can rely on for retirement because the tax treatment on owning multple houses is severe. While houses can remain unaffordable in places like Vancouver, the gov't takes the approach of taxation to discourage investment in houses (ie. taxing of non-residents, a 20% non-resident buyer's tax, vacancy tax, etc) vs in NZ they just simply banned foreign residents from buying existing houses. I much prefer the former than the latter because there's usually no complait to tax rich wealthy folk from all parts of the world.
While the real estate has always been shunned upon for profiting, this led the door open for capital flows into the more productive part of society ; the stock market and venture capital funding. Several of new programs came out with the clear focus of helping the lower end and middle class folk. By way of forming 'tax free compounding of registered funds', the lower income people had a chance to get in the equity market no different to the big boys that had their fancy henge funds. The early introduction was RRSP (just like Kiwi Saver) with employee contibutions ; but the employee also reduces their taxable income on what they contribute (not done here in NZ). In following the same tax free compounding approach, the gov't introduced RESP (education investment plans ; where not only the gains each year are tax free but the disbursements of the fund are 100% tax free when paid / used for education purposes). There's also disability investment plans too where the gov't provides grants and again, when say the disabled child goes to withdraw from the fund, it comes out 100% tax free. I'm not sure how such scheme would come to NZ becuase we're focussed on taxation at the source ; so you can't offer any benefit to those that use their after tax disposable income to fund / invest for education? What I see is the bar is treated the same whether you're rich or poor in NZ (IRD has been very good at discriminiting the needy and low income people) ; not personal exemption limit that Can and Australia have, and when I think about it, Ms Ardern did a mistake for not creating a more fair tax system in NZ. They could of implemented a mild capital gains tax program so they can look to similar investment schemes done abroad while maintaining a tax neatral stance. Anyways sorry for my long winded garble. At times overseas perspectives can give us a clue to how things can be done better. -
12-08-2019, 07:32 PMBaa_Baa
I have trouble reading books on discussion groups, but these conversations are important and interesting perspectives. The only thing missing for me is a disclosure on professional quals, with divergent views on complicated matters it would help to at least know what quals and experience backs ones assertions. Jmho
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12-08-2019, 08:30 PMpercy
I have followed the sharemarket since I was 16 or 18.I enjoy reading about business,the people,the ideas,the successes,the failures.For many years I had no money to invest.Yet I loved seeing companies I thought were doing the right things, do well.I also enjoyed watching the bad directors/managers failing where ever they went.Each morning I love seeing whether the Dow is up or down.I enjoy reading company announcements,seeing whether I was right or wrong with my projections.I enjoy AGMs and presentations.Always come away having learnt things,and a better understanding of the company.
On the 20th I hope to attend Syft's [unlisted] AGM.This company has a checked history.I have read up a bit on it.At this stage I do not hold shares in it.Depending on how the agm goes,I will either do a lot more research, or flag them away.To me this is my hobby.I just enjoy it.Being successful at it makes it even more enjoyable. -
15-08-2019, 09:18 AMSnoopyMy involvement with online investment forums goes back to the e-mail based 'sharechat'. I actively avoided going on 'sharetrader' because I did not consider myself a 'trader'. However, with the demise of the 'sharechat' forum, I had nowhere else to go in NZ. IOW I don't think you can surmise that those on this forum are all comfortable being put in that 'trader' box. However, I guess any on market share transaction involves a buyer and a seller and so can be classified as a 'trade'. If you go with that literal definition, then we are all 'sharetraders'.Quote:
Originally Posted by justakiwi
My late father had been involved in the sharemarket as an investor for as long as I can remember. It served him well. He never owned rental properties. He also held fixed interest investments back in the day a 7-8% return was the norm. So in my case, the sharemarket just seemed the logical place to invest if you wanted to earn more than a term deposit return. Low hassle - no tenants to deal with, and if you needed some capital it was only a broker's phone call away. In my case to 'change the family norm', I would be answering a different question to the one you pose 'justakiwi', namely:
"Why would you not invest in shares?"
I can't think of a reason not to.
SNOOPY -
15-08-2019, 10:55 AMJonboyz
I invest in shares because I'm too lazy to be a landlord. I have enough trouble finding the motivation to upkeep my own house.
Anyway, the sharemarket is far more interesting than property. -
15-08-2019, 11:58 AMfungus puddingI know what you mean. After many years as a residential landlord I grew tired of the work, and more-so the tenants. While I retain sufficient commercial property to provide a good living, I throw all spare income into listed property trusts. So refreshing - not even any paper work and the advantage of low tax with PIES. Outside of LPTs I don't have any shares - can't understand them.Quote:
Originally Posted by Jonboyz