Investing for the long term - a wise choice right now?

[Tronald Dump]

Smartshares ETFs are still expensive with an MER around 0.5%. Simplicity has there own NZ50 Fund with an expense ratio of 0.1%. Also, many ETFs are available on the ASX with much lower expense ratios.

I've looked at ASX listed ETFs but once you take into account broking fees and forex spreads they're not that cheap. The TER can be quite a small part of the total expenses of investing in offshore ETFs. e.g. one of the local online brokers charges up to 1.5% each way for forex trades.

I like that Smartshares are all NZD so I don't have to worry about forex costs, and for the NZ market they have 5 different NZ equity ETFs, including NZ50, property, high dividend and mid cap so there is much more choice of which companies and sectors to emphasise. The Mid Cap ETF has been a fantastic performer.

[SBQ]

[QUOTE=Tronald Dump;768016]

Can you do limit orders and GTC orders on Smartshares? I wouldn't be comfortable with the delayed arrangement where the orders go in on the 1st day of the month. If you sent funds on the 20th, this leaves an insider at Smartshares to speculate by taking a position to profit until the 1st trading day. I mean 10 days lead time is a long time for bad or good news to come out, knowing that clients are committed to the purchase of the ETF until the next month.

Yes, you can buy Smartshares on the market through any NZ broker just like any other share, but of course you'll have to pay the broker commission. For investing small amounts it makes more sense to go direct to Smartshares or buy the ETFs through a platform like Sharesies or InvestNow, both of whom invest your funds on the day they are received. Smartshares doesn't 'speculate' with the money - it sits on deposit until it is invested. The reason they do it this way is so they can pool the trades from all direct investors and invest through a unit creation process rather than buying on-market, which is why there are no transaction costs.

I understand the pooling of funds so they're purchased at 1 go in a month. My US online discount broker only charges me $10 per trade on any market, limit, ext-hours, and GTC orders. Haven't read what Smartshares actually charges on mgt / admin fees?

I also understand that if I was in a position where numerous different accounts sent me $ to pool and I told them their orders will go in on the 1st day of trading on each month, then this would also create a speculation opportunity to hedge against the funds. Because in 10 to 20 days time (however early clients send $), news is rampant and the market can change drastically. Just take recent example last week. The DOW lost over 1,000 within 2 - 3 days. You can be sure no Smartshare investor would of taken advantage of this market pull back because they're stuck on a 'buy on the 1st day of the month' scheme.

For more risky or complicated approach, what's not stopping someone at Smartshares to continuously go on the options market. Buy lots of call options knowingly they have clients wanting the buy the stock at the beginning of the following month or better yet, many months ahead (as most of the Smartshares customers would be locked into a minimum $50/month contribution plan).

Keep in mind, what the account holders in Smartshares don't know is a # on their account is just only that. There needs to be no programming on what the insiders in Smartshares can do with those funds during the holding period.

and to make this post relevant, does buying at the beginning of each month makes much of a difference in the "long term wise choice" as started by this thread? Most say it doesn't matter when to buy but I strongly disagree. Expert investors like Buffet know well that when to buy is equally as important as knowing how competitive the company they want to buy will last.

[SBQ]

Hi Snoopy a significant part of the world has leapfrogged NZ payments system and now have real time instant bank transfers and transactions can be done with mobile numbers and text rather than b/a numbers. Australia now has a more advanced system than us.

While that may be true on the consumer front, this is far from practice in the commerce business front where transactions are dealt in much larger figures. I'm speaking from a US/Cdn experience where online bank payment is discourage by businesses for the simple reason of accounting and taxation that require a formal 'paper trail'. You may think it's crazy but it's not because cheque writing provides the paper trail security that online phone or bank transfers don't have. Don't believe me? Then why in this day of age exists so much online fraud, theft, for people that accidentally give out their bank details and credit card #s etc or EFTPOS scanning machines etc? Not to mention it's a nightmare for accounting having to follow up online payments where a customer claims they've made payment sometime last year but not sure when the exact date it was. Then the accounting dept for that business has to double check their bank account end if payment was really sent and, then back to the customer saying they didn't receive it (was it not sent to the wrong account #?). You don't get this problem with cheque writing in businesses and no IRS/tax dept will question the cheque clearing process as being fraudulent like many do with online banking. ie "someone hacked into my bank account! vs someone forged my signature on the cheque"? For the latter to happen, the fraudster would have to 1st, obtain the blank cheque and then need to know what the signature looks like and then try to forge it, then try to present it at the bank. A lot of steps involved vs easily hacked bank accounts.

Anyways, for the small investor with routine monthly payments - places like Smartshares will work fine in NZ. What could make them better? If the client chooses to invest in US equities exclusively, give them the option to hold the funds in USD - meaning once their NZD is deposited, have it exchanged to USD and the currency stays in USD until they want to cash out. Because in 20 or 30 years time, you'll find the NZD will buy far less than what the USD can buy in terms of standard of living. I find this very important because there was a point that the NZD was very high around $0.88/$1 (NZD/USD). Now we're around $0.65 USD to $1NZD which is a significant drop in buying power in the past 5 or 6 years time frame. Of course no one can accurately predict the future but if one chooses to invest in US ETFs that are denominated in USD, then it's prudent to keep the currency in USD. In Canada the online discount broker Questrade does this for their clients because they know investing in the US market is a big part, so they allow clients to choose holding either CDN or USD currency exclusively.

[Tronald Dump]

Anyways, for the small investor with routine monthly payments - places like Smartshares will work fine in NZ. What could make them better? If the client chooses to invest in US equities exclusively, give them the option to hold the funds in USD - meaning once their NZD is deposited, have it exchanged to USD and the currency stays in USD until they want to cash out. Because in 20 or 30 years time, you'll find the NZD will buy far less than what the USD can buy in terms of standard of living. I find this very important because there was a point that the NZD was very high around $0.88/$1 (NZD/USD). Now we're around $0.65 USD to $1NZD which is a significant drop in buying power in the past 5 or 6 years time frame. Of course no one can accurately predict the future but if one chooses to invest in US ETFs that are denominated in USD, then it's prudent to keep the currency in USD. In Canada the online discount broker Questrade does this for their clients because they know investing in the US market is a big part, so they allow clients to choose holding either CDN or USD currency exclusively.

Smartshares are traded in NZD but the underlying exposure to overseas currencies is not hedged, so if you invest in a Smartshares US ETF you do in effect hold USD denominated assets. When you invest, Smartshares buys the USD then invests in the relevant underlying US market exposure, without hedging back to NZD. So the daily NAV (quoted in NZD) reflects both the return of the market and any currency movement.

[SBQ]

From Ray Dalio
"Identify the paradigm you’re in, examine if and how it is unsustainable, and visualize how the paradigm shift will transpire when that which is unsustainable stops."
"Though not always perfectly aligned, paradigm shifts have coincidently tended to happen around decade shifts—e.g., the 1920s were “roaring,” the 1930s were in “depression,” the 1970s were inflationary, the 1980s were disinflationary, etc"
https://www.linkedin.com/pulse/parad...fts-ray-dalio/

Will flight shaming or C neutral NZ affect AIA?
Does SUM rely in part to the housing market?
etc

Link doesn't work but eitherway big guys like Dalio do have a vested interest in making such statements. For eg like the one here about investors should keep investing in China
https://ca.finance.yahoo.com/news/ra...164637178.html

and plenty of those on the other side that claim we should be fleeing from investing into China:
https://t.co/8ZHYMfWlrX

So Dalio's comment about the past century may be no indication what will happen in the future. Not at all because 100 years ago, did people talk about 'intellectual property rights'? There's a lot of factors at play today that weren't an issue back then (more like each country grew and prospered on it's own). Today you can see countries wiped out by a competing country that obtains a clear technical advantage. ie. NZ's ability to produce dairy far exceeds the ability of Canada's diary industry to compete (so in response Canada puts up tariffs as high as 300% on imported cheese; kinda makes Trumps 10% on China goods look like a joke).

Capital flights of $$ is a serious issue and the NZ gov't (regardless who's in power) knows that a small country doesn't have many options. Once the wealthy have left, it's gone. Housing prices and all. And straight off the press:

https://www.fxstreet.com/news/new-ze...s-201908120040

"New Zealand Treasury has come out and confirmed that the Reserve Bank of New Zealand, (RBNZ), could cut OCR to minus 0.35% in a crisis."

For those that don't see the distinction, interest rates play a huge roll in the currency FX rate. Cash won't simply be put in NZD just to sit as cash term deposits. When you talk at such low rates, such as one where it goes lower than the USD fed rate, then the end result is the cash leaves NZ, leading to a weaker NZD to USD exchange rate. Hardly flight shaming IMO.

You see, that is why the NZ gov't won't touch the NZ real estate card ever because the last thing they want is a capital flight of wealth going from selling off NZ real estate and the wealthy move it abroad. It's been mentioned by previous NZ gov'ts that the NZ housing market is the 'pillar of all NZ investment'. Fine to tax other ventures and those who seek gains abroad with FIF, but when it comes to houses.. HANDS OFF - no CGT!!

The race for the RBNZ to lower interest rates to 0 will simply increase the cost of living in NZ. The same deal with China's RMB losing it's buying power to the USD recently. When the people have less buying power, they're going to consume less and the currency that can demand the most... wins!

Hope this hasn't been a huge bore and certainly getting off topic with the original post.

[kiora]

Probably needs unblocking activated
https://www.linkedin.com/pulse/parad...ifts-ray-dalio
flygskam
https://www.mnn.com/lifestyle/eco-to...industry-shame

[mani99]

Update: First purchase made, 50% of budget has gone to Smartshares NZ Mid cap ETF (via ASB and not Smartshare).

I may use the other 50% on another ETF or a more short term play. The more I research, the more my gut tells me that the prices for the "solid" stocks are overpriced and it may be better to wait a while.

[greater fool]

Removed. Thread dead.

[Brovendell]

Update: First purchase made, 50% of budget has gone to Smartshares NZ Mid cap ETF (via ASB and not Smartshare).

I may use the other 50% on another ETF or a more short term play. The more I research, the more my gut tells me that the prices for the "solid" stocks are overpriced and it may be better to wait a while.

A good choice. I have held this ETF since 2003 and it has served me well.
In fact I use it as my benchmark.

[greater fool]

Thread dead.