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Investing

Investing is all about buying things that put money back into your pocket. It may sound scary, but if you have a bank term deposit or are in KiwiSaver – you’re an investor.

You become an investor when you put your money into things that can earn income or grow in value. The general aim is to earn at least an after-tax return greater than the rate of inflation. Being an investor also involves a degree of risk. Generally, the higher the return, the higher the risk.

Your investor profile

Tip: Knowing your investor profile will help you work out the mix of investments that is right for you.

Shares? Bonds? Property? Term deposits?

Knowing your investor profile will help you work out the kinds of investments (and mix of investments) you should consider.

There are four sides to your investor profile:

  • Duration: How long do you want to invest for?
  • Returns: Do you want income or growth?
  • Liquidity: Do you need to be able to get your money easily?
  • Risk: Understanding the risk involved in different forms of investment and knowing your own attitude to risk.

Find out how to work out your investor profile and about the different kinds of investments.

Ways to invest

You can invest 'directly' through a bank (term deposits), sharebroker (shares and bonds), real-estate agent (property) or other brokers. If you invest directly in shares, bonds or property you’ll need to be well informed about the sharemarket, and the business or real estate scene. 

Read more about term deposits, shares and property investing.

You can also invest ‘indirectly’ through a managed fund. In a managed fund (or unit trust) your money is pooled with that of other investors, and a professional fund manager invests it in a variety of investments on your behalf.

Read more about managed funds including KiwiSaver.

Top tips for investing

Before you leap into any investment decision, there are some important rules you should follow:

  • Set your goals: Decide what it is that you are trying to achieve. Where do want to be at some point in the future? What is the final outcome that you want from your investments and what is your timeframe? Think about debt - is investing the right option for you right now? Would you be better off using your money to pay off high-interest debt (e.g. credit card, hire purchase), or to reduce your mortgage? 
  • Know your risk profile: You need to know what type of investor you are – essentially, how much money are you willing to lose? How much volatility (ups and downs) can you tolerate? To work out your investor type, use our investment planner.
  • Know how you want to invest your money: What mix of investments suits your investor type? Bonds, shares, property, bank deposits? Will you invest directly yourself or use managed funds? Our investment planner can help here too. 
  • Do your homework: Research, compare and contrast everything – or get someone to do that for you. Read the business sections of the newspaper, go online, talk to your adviser, bank manager, or accountant. We suggest you also read any documents, such as the investment statement and/or prospectus, relating to the investment you are considering.
  • Research different companies’ investment options: If you are going to invest directly in a company, find out which companies suit your type. Do they offer the kind of investments you are after? What are the rates of return for each investment? What is the level of risk associated with the return?
  • Research the companies themselves: What does the company do? What markets is the company in? Who is running the company? Have they ever been declared bankrupt? How is the company run? Does the board have independent directors? How has the company performed in recent years – is there a steady performance over time?
  • Get the right advice: Shop around for an Authorised Financial Adviser (AFA) who you have confidence in. Authorised Financial Advisers must tell you (in a written disclosure statement) how they are paid and the impact that can have on the advice they give you. Find out more about getting investment advice.
  • Spread your risk: As the saying goes, don’t put all your eggs in one basket. Spread your risk around different options and different companies. For example, if you are considering high-risk investments, you can balance your risk with other investments in lower risk areas, like bank deposits or cash and bonds.