Why invest

Success comes from taking a different set of steps. When it comes to investing, you want to take a more rewarding path.

Vistafolio is a pioneer in NZ Funds Management, using technology to provide wholesale managed investment accounts to local and international investors. We have a proprietary model portfolio strategy which is actively managed and invests in global shares on a daily basis. It has delivered a strong performance record over a number of years.

Investing in shares

As an ownership stake in a productive business, the value of shares you buy grows with that company and the economy. Your investment in that company helps it to produce goods and services, while providing jobs. The capital value of shares can keep pace with and very often exceed inflation, especially if the business does well.

As you’ve noticed with each passing year - prices go up. Owning shares is a great way to keep pace with those price increases, and when you own the right businesses, quite probably enjoy some gains. Many of these businesses also pay a share of their earnings in the form of dividends throughout the year, providing an income over and above capital growth.

Why global shares

If you only invest within your country and in your national stockmarket, you’re poorly diversified. Should a major shock hit, your investment portfolio could be decimated. Investing in global shares – as we do, allows us to spread your risk across different regions, currencies and markets. It also provides access to industries that may not exist in your home market. At the same time, seeking out currency arbitrage opportunities as part of our global investing service allows us to maximise and achieve additional returns for you.

Why have your funds managed from New Zealand

Standard & Poor’s the global ratings organisation recently rated the New Zealand economy as AA+ (in local currency) stating the economy is “wealthy and resilient.” Unlike other finance centres, New Zealand possesses a diversified economy spread across farming, services, technology and other sectors. It also provides a tax neutral solution to investors, since there are no capital gains or inheritance taxes. It has been ranked the least corrupt country in the world by Transparency International’s Corruption Perceptions Index 2018.

Investing from New Zealand

Most New Zealand investors buy real estate, local shares or keep their money in term deposits. In a small, open, trading economy, this is far more risky than many people realise. It is fine when immigration is strong, the property market is going up and good dairy prices support a strong currency. When any one of these factors falls away, your wealth can quickly erode.

Spreading your funds across global shares gives you diversity of exposure to growing global businesses across different markets, valued in a range of currencies. It allows you to access industries that may not exist locally. Having a partner such as Vistafolio to navigate you through this process ensures your managed account contains a portfolio of the very best global stocks in terms of fundamentals and timing.

Shares vs. property investment

From 2007 – 2017, New Zealand house prices grew 63.2% (Auckland 95.8%) - amoung the strongest growth rates in the OECD. Over the same period, international share prices grew 63.4% (71% in unhedged currency), while NZ shares grew 107.8%. (NZ Herald, 3/2/18).

For the purposes of an example, if we compare someone investing in the Auckland property market v. the local stock market, we must also consider yields. Average gross rental yield is 3.04% for Auckland property v. average NZX share dividends of 5.70%. After factoring in the costs of running a rental property, net yield has been estimated at under 2%. Considering yield, an Auckland rental property returned a total of approx. 115% v. a basket of local shares returning 165%.

In other words, someone investing $500,000 in the Auckland property market 10 years ago, should have around $1.075m today. Had they invested that into the sharemarket, it would be worth $1.325m. Dividends and growth from shares combine to exceed returns from property and you never need to worry about errant tenants, fixing the roof or plumbing - although there will be more volatility with shares.

Contrary to what many people think, both asset classes also offer the ability to use leverage. It is possible to borrow on shareholdings as it is on property. Leverage on shares is usually limited to a 50% margin, however at this time, interest rates on shares with our brokerage are significantly lower than mortgage rates.

Property is a separate asset class whose market is not highly correlated to equities, so there certainly is value in having investment property in your portfolio. However, residential property investment must also be considered as a business - requiring time, the ability to achieve profit, and management - often far more than people realise. Shares are also far more liquid. You can normally sell them quite quickly when you need the money.

This article is general in nature and should not be regarded as specific investment advice.

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