Being an investor sounds like something only rich people do – but anyone can invest, starting with only a small amount of cash.
If you have a KiwiSaver account, you’re already an investor. With a little extra money each month, you could launch your own investment portfolio and help get yourself on track for a brighter financial future.
“You don’t need tens of thousands of dollars to start investing,” says Tom Hartmann, managing editor of Sorted. “Now there are online platforms that have lowered the threshold for investing. Fifty dollars a month doesn’t seem like much, but over time it can really add up to a lot of money, so make sure you’re making good decisions.”
First, are you ready to start investing? You need:
- An emergency fund to tide you over if something goes wrong, “for that emergency car repair, or in case of redundancy,” says Hartmann.
- A KiwiSaver account, into which you pay at least $1043 per year, so you can get the government bonus. Even if you have high-interest debt you should do this, Hartmann advises.
- No high-interest consumer debt: “Aside from KiwiSaver, nobody with high-interest debt should be investing.”
Next, you need to ask yourself three questions:
- When do you need the money? If you might need it soon, don’t put it in KiwiSaver where you can’t get access to it until you’re 65.
- What are you saving for? Some investments are volatile and others are more steady; will your money be there when you need it?
- How much risk can you handle? If you’re going to lose sleep at night when your balance drops, go for a more stable investment, like bonds instead of shares.
What can you do with $50 a month?
If you don’t need the money soon, put it into KiwiSaver. Over 20 years, an extra $50 every month in KiwiSaver will turn into more than $17,000 (at 7% interest). You can use the KiwiSaver Fund Finder to pick the right fund for your risk profile – low fees are especially important when you’re investing a small amount of money.
Need the money to be more accessible? Consider a managed fund which invests in a range of companies in NZ and also internationally. A regular weekly contribution to a fund from as little as $25 per week can soon mount up to a reasonable investment over time. With all investment products the big thing to check out is the fees. For example, many of the share trading platforms have set fees and if you’re only putting in a small amount, the fees could wipe out any returns.
If you’re looking for some personalised advice, Westpac’s Wealth Office are able to give financial advice to Westpac customers. They can be reached on 0800 842 822 where they can give advice on investments, KiwiSaver, retirement planning or personal insurance.
Even with only a small sum, you can make a big difference to your future by investing your extra cash: “Most of the goals we have in life need money to fund them, even the things we don’t associate with money, like spending time with family,” says Hartmann. “Overall, everybody should be investing – it’s part of our future.”