Better options to invest large sum of cash than Term Deposits???

[SBQ]

Anyone? I would be glad to hear what others are doing (or have heard) with cash? I have a family relative that is not happy with 2.7% pa at BNZ Term Deposit. Large sum amount to mature this week - well over $1M principle.

I know it seems it would be best to put it in real estate? Suggestions?

[BeeBop]

Anyone? I would be glad to hear what others are doing (or have heard) with cash? I have a family relative that is not happy with 2.7% pa at BNZ Term Deposit. Large sum amount to mature this week - well over $1M principle.

I know it seems it would be best to put it in real estate? Suggestions?

I used to use Milford Diversified Income Fund....but I did sell in August as while the yield was good, the capital gain was too good for me not to realise. Milford will also give personal attention to an investment of over $500k. No doubt there will be other financial companies that will do the same - this is not a plug for Milford, merely my only experience. The other option could be the DIV ETF if they were to dollar-cost-average in to it.

Property is good but to get a good yield, nowadays, it involves a lot of work in optimizing the investment or accepting a ‘challenging’ location. If the relative is young and wants leverage - still could be a good idea....if more mature and not wanting debt, there will be other options.

[SBQ]

I used to use Milford Diversified Income Fund....but I did sell in August as while the yield was good, the capital gain was too good for me not to realise. Milford will also give personal attention to an investment of over $500k. No doubt there will be other financial companies that will do the same - this is not a plug for Milford, merely my only experience. The other option could be the DIV ETF if they were to dollar-cost-average in to it.

Property is good but to get a good yield, nowadays, it involves a lot of work in optimizing the investment or accepting a ‘challenging’ location. If the relative is young and wants leverage - still could be a good idea....if more mature and not wanting debt, there will be other options.

The problem I find with NZ brokerage firms is their magangement fee - somewhere around 1% on total value per year.

Since you sold up in August, can I ask what did you do instead ; where did the proceeds go to?

A Div ETF again, would be subjected to management fees by various managed funds and account holdings ; for the level of risk, if it's being NZ based, how much return would it be? (scapling higher gains for an immense level of risk).

FIF also restricts options from investing abroad. Meaning if I invested $1M abroad in a US ETF or stock and it returns 5% in the year, then I would have to declare 5% under FDR as taxable income. Which effectively, is no different to having a 5% term deposit return. The worse thing about FIF is it factors capital gains... if I were to buy a house, and make it a long term decision to hold it for more than 5 years, it would seem that would be a way better option than lowly term deposit returns. Recent news on the NZ housing market showed Dunedin being the biggest performer having a whopping 20% return over the past year.

My heart says I want some of that US equity market action.. but then that would require being a non-resident in NZ and moving abroad.

Would anyone be confident to move such large sums into say Sharesies into one of their ETFs? But the horror from my NZ relatives that warned me of the past ; how countless of NZ listed shares have gone bust while real estate still keeps going up. It's a real problem when you have $.. what do you do with it?

[BeeBop]

The problem I find with NZ brokerage firms is their magangement fee - somewhere around 1% on total value per year.

Since you sold up in August, can I ask what did you do instead ; where did the proceeds go to?

A Div ETF again, would be subjected to management fees by various managed funds and account holdings ; for the level of risk, if it's being NZ based, how much return would it be? (scapling higher gains for an immense level of risk).

my situation is a bit different as I operate internationally and am not NZ tax resident with three main asset classes.

1. So where did the money go? Boring...I paid down another mortgage as I have done with NZD over the past many years. It does reduce my leverage benefit but means that when I find a ‘unique’ undervalued property situation, I can use the equity e.g. I bought in Dunedin in 2014 when NO ONE wanted to buy housing (yes the house has gone up 150% since then and has low debt thanks to Milford).

2. Scalping: yes NZ funds to seem to scalp but I look at the AFTER tax and scalp returns balanced with the risk. Milford was good for this...and when I purchased, it did seem undervalued and was prior to the OCR drop.

3. DIV ETF....I would buy directly from the NZX (still have higher fees even in the vanguard system) but the diversification is easy.

4. You can get in on the international action by purchasing Investment Trusts listed on the NZX e.g Bankers, City of London, Henderson Far East (it should have a good yield as I own some on the LSE due to yield and may well be quite depressed at the moment due to Corona).

But I am a non-resident and have property, cold hard cash in a 0% bank account, and shares in three markets. I also note that it is difficult to purchase large parcels of smaller/mid-cap stocks in NZ as you can move the price too easily.

If I wasn’t doing what I was doing at the moment, I would purchase a blue-chip property in central Auckland to hold as a gold bar (with very low debt)...I would rent it out (as long as the rent covered the basic outgoings)...but $1m won’t be enough to do this (closer to $2m would be better) and the income would be low.

My thoughts only....and I always, always, always hold cash in relevant to life-style currencies and I have rental income...if it all hits the fan, you don’t need to sell the assets to cover costs in the next year or so....

[SBQ]

my situation is a bit different as I operate internationally and am not NZ tax resident with three main asset classes.

1. So where did the money go? Boring...I paid down another mortgage as I have done with NZD over the past many years. It does reduce my leverage benefit but means that when I find a ‘unique’ undervalued property situation, I can use the equity e.g. I bought in Dunedin in 2014 when NO ONE wanted to buy housing (yes the house has gone up 150% since then and has low debt thanks to Milford).

2. Scalping: yes NZ funds to seem to scalp but I look at the AFTER tax and scalp returns balanced with the risk. Milford was good for this...and when I purchased, it did seem undervalued and was prior to the OCR drop.

3. DIV ETF....I would buy directly from the NZX (still have higher fees even in the vanguard system) but the diversification is easy.

4. You can get in on the international action by purchasing Investment Trusts listed on the NZX e.g Bankers, City of London, Henderson Far East (it should have a good yield as I own some on the LSE due to yield and may well be quite depressed at the moment due to Corona).

But I am a non-resident and have property, cold hard cash in a 0% bank account, and shares in three markets. I also note that it is difficult to purchase large parcels of smaller/mid-cap stocks in NZ as you can move the price too easily.

If I wasn’t doing what I was doing at the moment, I would purchase a blue-chip property in central Auckland to hold as a gold bar (with very low debt)...I would rent it out (as long as the rent covered the basic outgoings)...but $1m won’t be enough to do this (closer to $2m would be better) and the income would be low.

My thoughts only....and I always, always, always hold cash in relevant to life-style currencies and I have rental income...if it all hits the fan, you don’t need to sell the assets to cover costs in the next year or so....

Non-residency is a key issue in my future estate planning.

Having checked local NZ brokers, it seems the fees are excessive compared to discount brokers in the US that have gone to a 0% fee base commission. I looked at www.directbroking.co.nz and they charge 0.2% for NZ equities and 0.3% for Aus and for 'telephone' rates it's a whopping 0.8% each way. So to buy you pay the commission.. and to sell you pay that same commission, either way the broker is laughing all the way.

Liquidity is a problem on NZX listed shares and agree... any person with a significant position will affect the share price too much... no wonder NZ brokers love the 'hyperactives'.

I've learned about Peer 2 Peer lending. Have spoken to a person at Squirrel and their market is to lend on "Personal Loans" which scares me. I mean it's really scary that they're paying lenders 6% and lending out at whopping rates like x2 times, in addition it's all unsecured.

[BeeBop]

Non-residency is a key issue in my future estate planning.

Having checked local NZ brokers, it seems the fees are excessive compared to discount brokers in the US that have gone to a 0% fee base commission. I looked at www.directbroking.co.nz and they charge 0.2% for NZ equities and 0.3% for Aus and for 'telephone' rates it's a whopping 0.8% each way. So to buy you pay the commission.. and to sell you pay that same commission, either way the broker is laughing all the way.

Liquidity is a problem on NZX listed shares and agree... any person with a significant position will affect the share price too much... no wonder NZ brokers love the 'hyperactives'.

I've learned about Peer 2 Peer lending. Have spoken to a person at Squirrel and their market is to lend on "Personal Loans" which scares me. I mean it's really scary that they're paying lenders 6% and lending out at whopping rates like x2 times, in addition it's all unsecured.

NZ is expensive whichever way you look at it. It is hard to get ahead living as a regular person in Kiwiland....all about life-style. Hotels, rent, food, entertainment, broker rates, management fees....it is all high. But people pay it because they like NZ and its relatively good living standard - having just completed five nights in a dodgy area of a “developing” city - there is no comparison.

Mostly safe income will come at 2.7%, unsecured at 6%, diversified via the NZX should deliver around 4.5%, leveraged via property may deliver 1 - 3% with a history of capital gains. But for the property income, I really think that rents may well have hit their ceiling....every man and his dog is now jumping into the spaces and competition has increased....plus there are more cheaply constructed new builds passing off as good rentals (until the unsuspecting buyer sees the maintenance issues in 5 years time).

And remember, it is the AFTER commission yield that you need to consider in NZ and balance that with the risk that is acceptable (as noted by Peat with the NBDTs).

[dagdaniel1]

Would anyone be confident to move such large sums into say Sharesies into one of their ETFs? But the horror from my NZ relatives that warned me of the past ; how countless of NZ listed shares have gone bust while real estate still keeps going up. It's a real problem when you have $.. what do you do with it?

If you were going down this route I'd go straight to Superlife - cuts out the middleman and is cheaper.

[Joshuatree]

GTM3442
"If I was a New Zealander and convinced that the NZD/USD rate was due to fall, I would be looking at a 0% foreign currency account"

Hi GTM, re the 0% account above ,ive been offered a $US account paying 1% to put some $NZ in. Are their fishhooks/ conditions/extra fees over the 0% FCA you mention? Thanks in advance

[GTM 3442]

GTM3442
"If I was a New Zealander and convinced that the NZD/USD rate was due to fall, I would be looking at a 0% foreign currency account"

Hi GTM, re the 0% account above ,ive been offered a $US account paying 1% to put some $NZ in. Are their fishhooks/ conditions/extra fees over the 0% FCA you mention? Thanks in advance

I just keep various currencies in accounts with CBA in Australia. The Australian government guarantees the deposits, CBA don't pay me any interest, and I don't pay CBA any fees. It seems like lose-lose all round, which is good enough for me.

[Snoopy]

Anyone? I would be glad to hear what others are doing (or have heard) with cash? I have a family relative that is not happy with 2.7% pa at BNZ Term Deposit. Large sum amount to mature this week - well over $1M principal.

I know it seems it would be best to put it in real estate? Suggestions?

SBQ, I didn't have the problem you describe on the scale of your relative. But I did get my biggest ever shareholder payout when I sold the bulk of my RBD shares into the takeover offer last year. I couldn't face investing what was for me a large sum. So I elected to 'kick the can down the road' and divide my windfall into five. This meant I had five bank term deposits maturing in 6 months, 1 year , 18 months, 2 years and 3 years. I have since reinvested my six month term deposit for two years. So I now have an equal amount of capital maturing in six monthly blocks for the next two and one half years.

2.7% may not seem a lot for a term deposit. But it still beats putting your money into an overvalued asset that will plunge in value. My aim is to buy good dividend paying NZ shares with this money eventually and I am now seeing opportunities that I did not see even six months ago.

Personally I would keep well clear of real estate in New Zealand. If you see the relative affordability of property in Auckland to be 10% worse than in London or 20% worse than Sydney or Vancouver then you know a serious correction is coming. Best bet in real estate IMO would be to buy a flat in New York - seriously! Very expensive in NZ dollar terms, but there are lots of well heeled people there that can pay a high rent

SNOOPY