What are your Investment Rules?

[SBQ]

SBQ I may not have understood all of it but that chart highlights my point.

Sometimes you don't have 25 years to recover your investment, especially if you have just retired and did not have a lot invested so cannot live on the income.

Comparisons above were against the 1970s so that is 16 years compared with 25yrs for the 1930s. I wonder what period we will rhyme with?

With more active central banks the down times are shorter each time. March 2020 was a blink and you missed it moment.

The PIE regime was setup to cap tax rates on savings at 28% to encourage people on the top tax rate to save for retirement.

Not sure how large funds calculate taxable profit. Years ago passive funds did not have to pay tax on capital gains but active funds did. Not sure about now. In down years individual investors can switch to the CV method for FIF income calculations, not sure about fund managers.

Agreed fund managers fees seem like a rip off as they are based on the amount you invest rather than the time it takes them to shuffle about funds. I guess that way they capture a percentage of your gains over time as well. Not sure why this is but you would hope that fees come down as Kiwisaver balances grow, but I would not hold my breath.

Personally I put in $1,042 a year to get the tax credit. Not a big fan of managed funds.

With inflation higher than 1979-1980s we could be in for the biggest bull run in the past century. In that chart, from 1985 to 1995 you has a massive bull run. Yes major crashes from 1 time events are very short lived. But what we have with inflation will span for years and when that settles down, then things start to get exciting.

The model with Kiwi Saver is all funds pay tax based on the individual's taxable income. However in that mix of stock holdings, you can have NZX shares that attract no capital gains tax, end up paying a lot of taxes on the dividends. Take The Warehouse Group which has paid consistent dividends for the past 20 years but it's share price has gone nowhere (worse if you factor the cost of inflation) and the individual is worse off when they are taxed on dividend income instead of NZ capital gains.

The Comparative Value Method does not apply to fund managers!! If I recall correctly in my readings, IRD states that all fund operators (passive or active) who receive contributions for investment, must use the FDR method. Either way each method, on a negative year, ends up having no tax to pay.

The PIE regime just rubs more insult to the small investor who are on lower income levels. Why should individuals on the high income tax bracket, get the benefit of only paying 28% on their Kiwi Saver fund when their annual income tax bracket could be 30%, 33%, or 39%??? It's the same kind of insult why the wealthy are able to buy multiple houses and hold in excess of 10+ years so all the capital gain is tax free.

I honestly believe Bill English did a disservice to NZ by introducing Kiwi Saver. The #1 beneficiary to this scheme is IRD. There's no disputing this math as John Bogle said, if the Market Return is 7% a year for 50 years, and the individual that has to pay tax on those market return gains year after year and also see's managed funds taking a cut, he/she may be lucky to see 5% per year net for the Market Return. However the latter only gets 1/3rd of the total gain while the 2/3rd is pocketed mostly by IRD and expensive managed funds and the cut that financial advisers take.

I'm also very critical on Kiwi Saver funds that do nothing more than buy the Vanguard VOO (S&P500 index ETF) as a passive fund way of investing, but charge 10 times more in admin/mgt fees. I know myself it does not take much for a broker to enter the buy / sell details to buy the VOO for their clients. Certainly being able to charge 0.1% or 0.15% on something that the Vanguard VOO only charges 0.04% per year. What reason do these NZ fund managers have to charge so much more on top of the Vanguard fund fee?

This is why I advice people to open up a Hatch or Sharesie account directly and manage their own retirement fund. A married couple can contribute up to $50,000 each before FIF applies. So they essentially they can buy the same VOO index ETF as so called KS saver funds do, but only pay the same rate that Vanguard charges. This I believe is the best bet for the small individual as even with Kiwi Saver, that 3% employer matching contribution is grossly negated by the higher mgt fees of funds, and the tax they have to pay in those funds, year after year.

[Aaron]

With inflation higher than 1979-1980s we could be in for the biggest bull run in the past century. In that chart, from 1985 to 1995 you has a massive bull run. Yes major crashes from 1 time events are very short lived. But what we have with inflation will span for years and when that settles down, then things start to get exciting.

The model with Kiwi Saver is all funds pay tax based on the individual's taxable income. However in that mix of stock holdings, you can have NZX shares that attract no capital gains tax, end up paying a lot of taxes on the dividends. Take The Warehouse Group which has paid consistent dividends for the past 20 years but it's share price has gone nowhere (worse if you factor the cost of inflation) and the individual is worse off when they are taxed on dividend income instead of NZ capital gains. Keep in mind NZ has imputation credits so that company dividends are not double taxed. One of the reasons American companies retain earnings and go for growth as they double tax dividends

The Comparative Value Method does not apply to fund managers!! If I recall correctly in my readings, IRD states that all fund operators (passive or active) who receive contributions for investment, must use the FDR method. Either way each method, on a negative year, ends up having no tax to pay. FDR is always 5% of the opening market value of your FIF investments so unless they have dropped to zero there will always be taxable income using this method

The PIE regime just rubs more insult to the small investor who are on lower income levels. Why should individuals on the high income tax bracket, get the benefit of only paying 28% on their Kiwi Saver fund when their annual income tax bracket could be 30%, 33%, or 39%??? It's the same kind of insult why the wealthy are able to buy multiple houses and hold in excess of 10+ years so all the capital gain is tax free. The whole monetary system is set up to favour the asset owners, PIE rates can drop to 10.5% or 17.5% if your income is lower but not the same as the benefit provided to someone on 39%.

I honestly believe Bill English did a disservice to NZ by introducing Kiwi Saver.Michael Cullen introduced Kiwisaver, we have discussed this before The #1 beneficiary to this scheme is IRD. There's no disputing this math as John Bogle said, if the Market Return is 7% a year for 50 years, and the individual that has to pay tax on those market return gains year after year and also see's managed funds taking a cut, he/she may be lucky to see 5% per year net for the Market Return. However the latter only gets 1/3rd of the total gain while the 2/3rd is pocketed mostly by IRD and expensive managed funds and the cut that financial advisers take. at tops IRD take 39% not sure your way of thinking on this. In an ideal world we would have no tax nor any need of a financial advisor but that is not realistic. Anything adds up compounded over 50 years. Interesting they compounded Kiwisaver returns over 48years to get a significantly large figure to spook investors around the GST on mgmt fees. https://www.nzherald.co.nz/nz/govern...TUL5DG7UFEWA4/

I'm also very critical on Kiwi Saver funds that do nothing more than buy the Vanguard VOO (S&P500 index ETF) as a passive fund way of investing, but charge 10 times more in admin/mgt fees. I know myself it does not take much for a broker to enter the buy / sell details to buy the VOO for their clients. Certainly being able to charge 0.1% or 0.15% on something that the Vanguard VOO only charges 0.04% per year. What reason do these NZ fund managers have to charge so much more on top of the Vanguard fund fee?

This is why I advice people to open up a Hatch or Sharesie account directly and manage their own retirement fund. A married couple can contribute up to $50,000 each before FIF applies. So they essentially they can buy the same VOO index ETF as so called KS saver funds do, but only pay the same rate that Vanguard charges. This I believe is the best bet for the small individual as even with Kiwi Saver, that 3% employer matching contribution is grossly negated by the higher mgt fees of funds, and the tax they have to pay in those funds, year after year.

See in red, agreed better to cut out as many middle men as possible to get the best returns as long as you stick to indexes and hope the time in the market mantra works for the next 10-20 years.