How to grow your money – beyond investing in property

It’s been the age-old Kiwi dream. Save up for your first home, do a little reno to make some money and then use that equity to buy an investment property. Then keep that cycle going until you’ve got a bigger, nicer home and maybe a rental. Historically, bricks and mortar were seen as a “safe” option for growing your money and investing in shares was too risky.

But with rising house prices many of us have been locked out of the market – despite the recent drop in prices.

Home ownership rates have been falling for a couple of decades, particularly for those in their 20s and 30s. In 1991, 61% of 25-29 year olds lived in their own home compared to 44% in 2018. And 79% of those in their late 30s lived in their own home in 1991 compared to 59% in 2018.

So what are the options for New Zealanders who want to grow their wealth if they're not able to or don’t want to buy a house?

World Investor Week (3 – 9 October) gives us a chance to reflect on investing and how you can still create wealth for yourself over the long term.

Growing your money with shares

The explosion of DIY investing apps has meant that investing in shares is more accessible than ever. In fact for the first time, this year, more New Zealanders have invested in shares than term deposits.

Sarah is a 23-year-old from Auckland who has turned to investing in shares and funds rather than buying a home. She runs The OneUp Project, a podcast and Instagram account providing information on financial literacy and personal growth, and has noticed there’s an increase in other young New Zealanders doing the same and seeking information about how to invest beyond buying a home.

Sarah talks about being a young investor - “so many of us want to invest! Most of us don't know where to start though and that's where having more relatable financial resources is so important.”

“We want people who can meet us where we are at on our investing journey and hold our hand to being a resilient investor with a strong portfolio for our long-term goals. My investing episodes are some of my most popular so the desire to learn is 100% there!”

How easy is it to start investing?

The good news is investment options are more accessible than ever; your hard-earned savings don’t have to sit in an account being eaten away by inflation.

Sarah thinks it is definitely getting easier for New Zealanders to invest, “with DIY platforms and more and more financial education surrounding investing it is definitely more accessible than it once was.”

Hatch is one of the new investment platforms that make it easier to start investing. With these platforms you can choose from a range of shares and funds and can even start investing with just $5!

Jarred Sewell, co-founder and Acting CEO of Hatch says, “we built Hatch so everyone with access to a phone, tablet or computer could get affordable access to the US share markets, investing as much or as little as they chose, without drowning in a sea of jargon.”

Hatch is a fan of buying shares for the long term. “We support a buy and hold mindset, encouraging our investors to buy shares or funds for the long-term.”

Investing in the sharemarket over housing

The prohibitive cost of housing means you need a significant deposit to enter the market – this is not the case with the share market. You can start right now.

Sarah from The OneUp Project has sensible advice on starting. “My favourite piece of advice is to pick one thing to focus on first and then move on to other parts of your financial development.”

“It's so easy to become overwhelmed with all the things we 'should' be doing to improve our future. You will be more productive by choosing to improve a little bit consistently rather than a lot all at once.”

For some, investments may provide a better option than signing up for significant debt with a mortgage, which may be further impacted by high interest rates. Or investing in shares now may be a way to maximise your deposit if you’re saving up over a longer period of time.

Jarred Sewell says “all investment is risky, but compared to New Zealanders’ love of investing in real estate, investing in the share markets comes without needing a giant lump sum of money to start, and no tenants, body corporate fees, property managers, rates, tenancy laws, or maintenance.”

Starting now – today is the best time to invest

“Investing in the share markets can also benefit from taking a set and forget approach over the long term, and investors can choose to invest a little at a time over years and years, as many do with KiwiSaver.” says Jarred Sewell.

One of the key benefits of investing at a younger age is by starting early, you will have “time in the market” giving your money a longer period to grow – as opposed to the idea of “timing the market” and finding that unicorn investment at the right time that will make you rich. Like most unicorns and rainbows, this can be an illusion, and can be a futile approach to investing.

Good investing is long-term investing

For investing, playing the long game will ensure you get the benefits of compound interest, making sure your money is working for you, if you stick with it!

It is important to be diversified (spread that nest egg around!), ignore the wobbles and think about where you want to be in 20 to 30 years. An important message from this year’s World Investor Week is that good investing is long-term investing.

One of the best ways to avoid having to cash shares in (and therefore locking in any paper losses) – is to have an emergency fund. It means you have money in a bank account saved for unexpected costs that you can dip into and pay yourself back again later. This stops you from having to sell shares at a time that might not be right – it also avoids a short-term approach.

Hatch is pleased to see that many Kiwis are taking on this approach - “We’ve seen that one-third of our Hatch investors have never sold their shares since buying them, with many adding to their investments over the past year.”

So take the first step today - try our investor profiler to work out the right investing strategy for you.