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  1. #91
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    Thank you for this explanation. I have never understood the apparent contradiction until now.

    Quote Originally Posted by SBQ View Post
    Also some of you may ask why has Buffet been able to beat the market index for MOST of the years since he took over Berkshire? I mean it's like he's speaking in contradiction to himself. It's because his caliber to investing differs to managed fund. For eg. brokering deals for merger and acquisitions, being able to led out cash at obscene rates, the list goes on and you can bet NONE of the Kiwi Saver funds would be in any position to make such deals. During the GFC, Goldman Sac needed $$... so they went to Buffet, in return he demanded 10% on the $ + with warrants and options. You can bet the strike price on the options deal with GS was to his terms. So all these gravy incomes come into Berkshire that benefit the shareholder. As his right hand man said to Buffet at the at their AGM some years ago, "Why are you telling the audience this?.. they've essentially done better than the index ETF by buying Berkshire".

  2. #92
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    Quote Originally Posted by Snoopy View Post
    One area where NZ seems to differ to the UK and Canada at least is that income earners in the latter two jurisdictions have a choice between contributing to a government regulated 'investment scheme' or a government regulated 'pension scheme'.

    https://www.moneysavingexpert.com/sa...lifetime-isas/

    In the UK if you invest in a 'pension scheme', then at age 55 (rising to 58) you can only take out 25% of your pension scheme as a lump sum. The rest is paid to you as income and you pay tax at your marginal rate on that. Pension scheme contributions are made from pre-tax income. So with a pension scheme you do pay tax eventually but at normally at a lower rate because your income is lower in retirement. Furthermore employers are required to top up any employees pension scheme at a rate of 3% of salary.

    However with the ISA which is more an 'investment scheme' your contributions are made after paying income tax. With the pension investment scheme ISA, the LISA, The maximum amount you can save per year is 4,000 (c.f. ten times that for a pension scheme). There is no top up from employers and you have to wait up to five years longer (at age 60) to access it. Why should you need to access your LISA early? You will have to pull money from your LISA before getting access to any pre-retirement age benefit entitlements. Having to do that could decimate your retirement savings.

    Both schemes have a state contribution of 25% to top them up. However, if you have to access your LISA early this must be paid back. Higher-rate taxpayers get tax relief at 40% in a pension. So to contribute 100 only costs them 60 easily beating a LISA.

    Is that SBQ 'Pension vs LISA comparison, somewhat akin to the difference between the Canadian TFSA and RRSP?

    It looks like the good old Kiwi taxpayer does have some advantage over the UK saver at least.

    1/ Kiwisavers can take out all of their savings in a lump sum if they want to once they reach the qualifying age. There is no tax to pay at that point.
    2/ No government subsides have to be paid back if the Kiwisaver is reclaimed early due to hardship.
    3/ You can go on a benefit without being forced to withdraw your Kiwisaver.
    4/ There is no limit to annual contributions
    5/ No restrictions on Kiwisaver providers on markets they can invest in.

    So really the average punter with a Kiwisaver account is not as badly off relatively as you make out?

    SNOOPY
    Canada's choice of pension is a many but TFSA and RRSPs are not mandatory. I recall some years ago the Finance Minister of NZ wanted to make it compulsory for ALL workers in NZ to go into Kiwi Saver. In Canada RRSP is entirely up to you but most choose so because of the ability to defer tax and REDUCES the person's taxable income. I'm not sure if this is done for Kiwi Saver because the small 3% employer matching would make much difference to the person in NZ. I question, if the wage earner were to contribute 8% of their pay into Kiwi Saver, does THAT 8% lower their taxable income? Does IRD recognise you earned say $100K and can take $8,000 off that so your actual taxable income would be $92,000? In Canada they have RRSP contribution limits that you can carry forward if not used so you can have situations where 1 year a person pays so little income tax as they keep lowering their taxable income. I know the carry forword and back for contributions is not allowed in NZ.

    @1) and that's entirely the point i'm hitting hard at. Kiwi Savers are being hit hard with tax every year without the ability to future plan your tax outcome in retirement. No consideration to the high income earners or the low income earners throughout their lifetime. For RRSPs, I should add that all of it must be converted to RRIF before age 71. Basically the gov't does not want the person to compound their investment forever so the conversion to an 'income fund' so they can get taxes on it. Keep in mind when the person dies, deemed disposition kicks in so the whole portfolio will be taxed. Under RRIF, there's a minimum amount of income that MUST be drawn from it but the investments stay compound tax free.

    @2) same with any gov't grants in Canada. The only time they do have to be paid back is if the person doesn't play by the rules and over contributes, withdraws too early, etc but rarely the case. In 2020 the Cdn gov't has introducted the FTHBI (1st time home buyer incentive) which the gov't will lend 5% (or 10% on a newly constructed home) for amounts up to $500K. That loan has no annual repayment but instead, adds as part equity stake to the person buying their home. Either 25 years or when the person sells, that capital gain that results is when the person repays the gov't ; a WIN : WIN because the person doesn't pay interest on the loan and the gov't of Canada shares part of the capital gain.

    @3) same deal in Canada as laws prevent the sale/withdrawals from the RRSP ; but generally speaking people on welfare or on the dole don't have much of a savings plan.

    @4) only limit on the RRSP is 18% of your total annual income. But as I mentioned before, the more you contribute, the lower your taxable income becomes.

    @5) as i've hammered before, there lies a huge tax disparity between NZ shares vs overseas share that fall under FIF. The small investor up to $50K NZD is better off investing abroad as the FIF doesn't kick in until over that threshold. You have a disparity between Kiwi Saver funds and the individual in this respect ; why? and as I mentioned before in other threads, the individual that invests abroad directly owning the shares can pay no FIF on years of loss ; why the fund manager is stuck paying FIF regardless on years if they profit or lose % return on their clients.

    So when you look at all the complexities and differences, it's no wonder why people keep investing in real estate instead of the sharemarkets. IMO the average person in NZ is better off getting a mortgage from the bank to leverage their investment in another house.

    FYI, Canada has a mandatory pension scheme called CPP (Canada Pension Plan) where a portion of the pay cheque is paid into. We don't have this in NZ and it's not to be confused with the gov't superannuation scheme; Canada has that too called OAS (Old Age Security) pension that everyone gets; and if OAS is not sufficient say you earn below income threshold ; you can claim the 'supplementary benefit'. So when you look at Canada at the various pension plans and schemes they have, it's no wonder why very very few exPat Kiwis living in Canada would ever reside back to NZ. Why would they when FIF will hit them so hard and if they had to sell up their portfolio, the tax on the gains would hit them hard. End result being, who in their right mind would move from a deferred tax scheme to an inequitable tax scheme we have in NZ (FIF/no tax on NZ share gains etc) ?

  3. #93
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    Out of curiosity, why did you move here? I came from the UK for the lifestyle, not the tax system, and have no regrets. Now I play the tax hand I am dealt here, and find it reasonably easy to save and invest. Tax certainly doesn't stress me out, happy to help out the less fortunate and pay my share.

  4. #94
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    Quote Originally Posted by mfd View Post
    Out of curiosity, why did you move here? I came from the UK for the lifestyle, not the tax system, and have no regrets. Now I play the tax hand I am dealt here, and find it reasonably easy to save and invest. Tax certainly doesn't stress me out, happy to help out the less fortunate and pay my share.
    There are 2 things in life you can not get away from. One being taxes & the 2nd, being part of a family. The latter is what brought me to NZ and the former was what took me away from Canada. Now i'm confident to say the table has turned around when comparing both places.

    Family relations that are close to me know my displeasure in the direction that NZ is going (or has gone in the past 10 years). It never use to be that way when I first arrived in 1996. Back then NZ never had Kiwi Saver, taxes on foreign investment or any form of regulations like the NZ FMA, OIA, & AML. GST was 10% More people owned their homes and newly uni grads and trade workers had better prospects of landing a decent job.

    I recall some years ago waiting in the airport lounge before boarding talking to an older man how he believed NZ was still the land of the milk and honey. I questioned him about home affordability why it's so expensive in Auckland. How do normal jobs like teaching can afford to live in places like Auckland when their pay is not reflective to the cost of living. His response was well... not very convincing and this is what I find with most of the view in NZ. No one questions and no one seems to care until it goes way way out of control that you can't fix it. No different when I spoke to an architect here in Chch from one of these major group builders. I was asking about lifting the building standard like we do in Canada. Issues like solar PV, thicker walls, air tight construction with balanced pressured HRV, etc and the guy's face had the same look as the guy I spoke to at the airport. His response was, "well you may think these are great ideas but unfortunately, the people in NZ don't think this way and the reality is they really don't care about the price of electricity over the long term. Instead what they feel is they accept the small gradual increases in electricity pricing annually and adjust their lifestyle / income towards that". He also said you're never going to get a payback on these improvements and certainly the insurance companies don't care for it. With no surprise, i'm seeing the same views in NZ finance too because so little of this subject is talked about in general public ; perhaps need to look at the schools for a lack of teaching in this subject, because in Canada, finance is such an integral part in living ; on the TV news, talk shows, etc. So what I learned here in NZ is people don't care about money and therefore the ignorance of not knowing would lead them to less stress in life. Perhaps question why 25% of NZ's global population lives abroad? Why are few senior expats moving back to NZ? There are a lot of questions to be asked but no one in NZ seems to want to hear the real answers.

    Canada use to have this kind of attitude towards taxation and finance to the point that the PM had to address brain drain and a flight of capital leaving the country. The US health care system was continually draining the skilled doctors and nurses from Canada (I know 1st hand of close friends that left Canada during the time I left and you know... they are NOT going back). So if you question about being "happy to help out the less fortunate and pay my share" well there's a rude awakening about this view. What happens is the gov'ts realise there isn't enough $ to go around and people's life and liberty begins to erode. They bring in new taxes, elevate the cost of living, and keep things highly regulated (gee sounds the opposite of what Donny Trump is trying to do in the US). All while we are lead to believe 'Yes it's OK if i'm paying more taxes and taking a huge cut on my standard of living' while we see the skilled leave NZ. As I told my wife, the 2 of us have no problems and financially we've already made it and it would not matter where we live. However, when I speak about my children? Whoa daddy that's an entirely different story. How acceptable that it becomes cultural that the only way the next generation can buy their 1st home is to rely on their parent's wealth to make it affordable? and to think how that man at the airport says NZ is the land of the milk and honey?

    So you may ask again, why am I still living in NZ if the grass is greener in Canada? Again, you can't run away from family. But 1 day my relatives can't live forever and 1 day my children will grow up and will need jobs. So until that time comes we are pretty much stuck here.

  5. #95
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    Quote Originally Posted by SBQ View Post
    I've read many books in the past. Now, I prefer someone smarter, Warren Buffet already has read the books and what he conveys is smart enough. How many ways does it take to show the people how much of a scam 'salesmanship' has been in the selling investment packages for the newb investor?

    Diversify across all asset classes? Man, if that was true i'm sure many would of outdone Buffet's track record. But I will EAT my own shoe if the markets hold a 'strong form of market efficiency' for which diversification to work well. Market Efficient Hypothesis is just like EBITA - the same BS crap that they teach at business schools.
    Yeah well, if you and Warren Buffet share the same goals and the same timeframe, then why not?

    Diversification is a strategy to reduce risk. It's obverse is concentration. They are both valid strategies - indeed I'd imagine that they're probably complementary.

  6. #96
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    Quote Originally Posted by GTM 3442 View Post
    Yeah well, if you and Warren Buffet share the same goals and the same timeframe, then why not?

    Diversification is a strategy to reduce risk. It's obverse is concentration. They are both valid strategies - indeed I'd imagine that they're probably complementary.
    Of course, we learn lowering risk in elementary stats class and it's sold on to everyone in portfolio theory. But it's by no where near a proven strategy for outperforming the market. You should know the more you diversify, the less return you get as you get closer the level of averages (kinda like the limit function in calculus on the x/y graph where the line gets closer and closer but never gets to the line)

    The whole investment community has been lead to believe everything has to be diversified. You have the gov't embracing it, schools embracing it, and who are the real losers? The real winners are the fund managers that make themselves look good (who spend a lot of time doing nothing) because they don't know how to produce exceptional returns with skill. The losers are the investors because as I said before, more $ is robbed from them in the form of administration fees, taxation, and making bad investment choices, than showing real returns. I recall some years ago the NZ Superannuation fund was trying to sue some bank in Spain because they took a bad stake in a poison pill venture. Like who was the goon that OK this kind of deal? - and you can be sure no one was held accountable. The markets are not efficient enough to make diversification a relevant AND reliable form of investing to depend on. Yet, financial advisors still push this hopeless strategy to their clients. I see over diversification all too often. You have a newb investor that says I have $10,000 to invest and instead of picking key performing stocks in an index, they're compelled to believe diversification is the key and buy like 30 stocks over the 5 years they stay invested. Or they feel that so and so Kiwi Saver fund is good and puts $10,000 to them for which the aggressive fund allocation has like 200 different shares invested. Then the investor comes back after several years saying how come my investment returns are so little? Well the financial advisor will always say something like, "Investing is a LONG TERM plan and you should ignore the times when the market is doing very bad". They all seem to have the right excuses...

    That's why in Canada, the gov't realise that for the vast majority of 'small' investors looking to save, they brought out TFSA, RESP, RDSP, etc aimed specifically for the low and middle class people that would struggle to save $2K to $6K a year. By leaving them with a tax free status on those registered investment plans, it gives a HUGE incentive for the general public to get knowledgeable about finance, when in the past, it was only the big boys with large 7 figure accounts that would make the money. The small guy doesn't have to seek to pay lofty fees for some 'financial advisor'; there's already plenty enough information online about investing; so they can invest directly in a low cost discount brokerage account that doesn't charge moronic fees like 1% per year on total account balance that i've seen with some NZ brokerage firms.

  7. #97
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    "You should know the more you diversify, the less return you get as you get closer the level of averages. . . "- I'm inclined to think that how and what you diversify is also important. Conversely, the more you concentrate, the further away from the level of averages you can get. Out of idle curiosity, what do you benchmark yourself against?

    "I recall some years ago the NZ Superannuation fund was trying to sue some bank in Spain because they took a bad stake in a poison pill venture. Like who was the goon that OK this kind of deal? - and you can be sure no one was held accountable." - Context can be quite important - should it turn out that your goon made 5 good calls for each one bad one, what then?

    But in general, I suspect the broad thrust of your comments about the New Zealand retail financial services industry is sure to strike a chord with many.

  8. #98
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    Quote Originally Posted by GTM 3442 View Post
    "You should know the more you diversify, the less return you get as you get closer the level of averages. . . "- I'm inclined to think that how and what you diversify is also important. Conversely, the more you concentrate, the further away from the level of averages you can get. Out of idle curiosity, what do you benchmark yourself against?

    "I recall some years ago the NZ Superannuation fund was trying to sue some bank in Spain because they took a bad stake in a poison pill venture. Like who was the goon that OK this kind of deal? - and you can be sure no one was held accountable." - Context can be quite important - should it turn out that your goon made 5 good calls for each one bad one, what then?

    But in general, I suspect the broad thrust of your comments about the New Zealand retail financial services industry is sure to strike a chord with many.
    How and what, and concentrate? You can pick narrow base fund that concentrate in a certain segment but then they should be measuring their performance their relative index. ie. relevant commodity index, relevant emerging market index etc. The same rules apply, the more you diversify, the more you become average to that index. Personally i'm only interested in a broad market index so I look at the S&P500 or the DOW index. That is the same benchmark that Buffet refers too and so should most managed funds when they are choosing a broad base diversification for their clients.

    As for the NZ Superannuation Fund, the link in question is here:
    https://www.stuff.co.nz/business/ind...over-200m-loss
    That goon needs to measure his performance to OTHER superannuation funds around the world just like you would with an index fund. So if he's picked 1 bad one (re: the Portugal bank loss), then his other 5 good calls need to be compared to the good calls by other gov't pension funds in other countries. Perhaps there is no benchmark if the NZ Superfund holds most of it's assets in NZ. But I can assure you no pension fund would limit their investment in a narrow base investment if they choose to hold investment mostly in their native country. But going back to the bank investment in Portugal. You have to question how was this goon sucked into this investment by GS? Why couldn't GS suck in some other managed fund in another country? My guess.... the NZ Superfund didn't know better because they never had better information outlining the risks they were getting into. Because it certainly sounds very fishy to lose that $ in 1 or 2 months time frame. Certainly, it's an issue of lack of information for all investors and if you don't have a strong form of market efficiency, then there's little point of pushing the diversification button.

    But in general, I suspect the broad thrust of your comments about the New Zealand retail financial services industry is sure to strike a chord with many.
    Why would it? Is it not because the truth hurts too much? Just like the NZ building industry we're timber prices are 3 times the price in NZ than what the American can buy at Home Depot? HUGE barriers of trade and HUGE levels of regulations. How about that FMA the NZ gov't dished out last year? You know how stupid NZ looks when they impose a NZ regulation abroad saying for eg. to US brokerage firm, if you're providing services to a NZ resident, that you must comply to our NZ regulation by banning the client access to derivatives and futures / options and forex? What are the repercussions over this? I tell you, the foreign markets will just exclude the NZ market and then you wonder... why is it the NZX experience dwindling liquidity? Here's what I see, the NZ equity market is gonna dry up like a deep fried potato chip and the only people holding the bag are the poor NZ investors.. stuck in schemes like Kiwi Saver all while you have FIF that distorts the tax issue when you want to invest abroad. Other developed nations like Sweden, I know for fact opens the door wide open. Their residents and their pension funds allow full access to foreign markets with no regulation or restriction and certainly not such tax disparity like FIF.

  9. #99
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    At the risk of pissing people off, can I just say, this thread is getting off track again, and the current debate is really not helping me with my original question, or anything else for that matter. Maybe the thread has run its course and we should all move on to something else.

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    Quote Originally Posted by justakiwi View Post
    At the risk of pissing people off, can I just say, this thread is getting off track again, and the current debate is really not helping me with my original question, or anything else for that matter. Maybe the thread has run its course and we should all move on to something else.
    I second that, justakiwi. If there is something else to air, others should start the appropriate thread/s and leave your original question for relevant comments.

  11. #101
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    Been an interesting read on a wet sunday morning.I agree that a background in accounting or at least a basic understanding of it is invaluable but i think some knowledge of those running the company and pulling the strings can give a great indication to its possible success or failure.Easily researched in this modern world.Good luck.

  12. #102
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    Not sure if this is the right thread for my question but here goes....

    I invested small amounts a couple of years ago in the sharemarket to basically test the waters without worrying about losing my life savings - don't put in what you can't afford to lose, right?

    I've noticed a few comments on various threads about traders vs investors and it seems like the investors look down on the traders or am I missing something here?
    How do you even define a trader? ie hold something for a month, 6 months, a year?

    My first share of POT I kept for 2 years before selling with a 20% gain recently while a purchase of shares in ABA during lockdown got me a 110% gain in a little over a month.
    It may very well climb further but I'm more than happy with that, as should most people.

    Investors who may hold for a very long time may never see that gain so is one better than the other? I mean, it's as simple as making money as far as I can see. Don't investors see it that way?

    Curious to see if any long term investors here have thoughts to share

    Thanks

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    Quote Originally Posted by Not The Chosen One View Post
    My first share of POT I kept for 2 years before selling with a 20% gain recently
    Possibly an investors behaviour depending on your thoughts at the time of purchase

    Quote Originally Posted by Not The Chosen One View Post
    while a purchase of shares in ABA during lockdown got me a 110% gain in a little over a month.
    Definitely a trade , even if you bought with the best of longer intentions. Although weirdly enough you might get away with this to the tax department (once or twice only) if you were somehow able to demonstrate your intentions.

    But I think you're asking more about sentiment and why some people hold for ever. The best answer would be that its the way to get stupendous gains (in some cases) and that one or two huge winners could change your life. The downside to selling even when you make a good profit is that you might miss out on those 10,000% gains that some talk about with shares like XRO or Netflix or ATM etc etc. And the reason I say this is because I did it today, taking a good profit with a company that I strongly suspect will go ballistic! Haha but of course it might not - who knows.
    For clarity, nothing I say is advice....

  14. #104
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    Thanks for the reply.

    Yes, it was probably more about the investors holding for as long as they do. It certainly makes sense when you get those massive gains from the likes of XRO which I did hear from a couple of people who invested in them and did bloody well - an element of luck must come into play in some of those instances I would have thought.

    I guess the one's I researched and looked at to see how they performed over the last 5 years got me thinking why invest for that long when in some cases, they were basically flat or losing money the whole time.

    There's probably a lot of novices like myself who saw some big drops in mid March and decided to buy like I did with ABA, for example. The harder test may be to come when I can't simply look for someone that's had a huge drop in the space of a few weeks or few days to jump on to.

    This site definitely helps when you can get so many perspectives from everyone that makes you think a little bit more.

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    I typically invest because
    1)I don't want to be taxed on gains
    2)I don't wish to be a hypochondriac worrying about about osculations in daily/minute share price movements
    3) traders need to be on their game all the time with fancy graphs to tell them when to buy/sell ie I'm a lazy investor
    4) I find if you don't own a particular share on 12 days/365 days you tend to miss the gains
    5) Trends are your friend.Over the last xxxx years the market has always gone up over the long term
    6) I'm happy to gear up the portfolio when the time is right to maximize the return on capital in what I perceive a low risk/reward company( pays a dividend,low/well managed gearing,growing profitability)
    7) I don't wish for a full time job trading,more set & forget

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