How to start investing

Investing is all about buying things that put money back into our pockets.

Sound intimidating? It’s really not! Those of us who have a bank term deposit or are in KiwiSaver – we’re already investors! 


You're an investor when...

We become investors when we put our money into things (assets) that can earn income or grow in value. The general aim is to earn a return that’s greater than any fees, taxes and inflation – and grow our money to reach our goals in life.  

Being an investor also involves a degree of risk. Generally, the higher the returns we chase, the higher the risks we’ll need to take on. 

If you have KiwiSaver, you're already investing!


What type of investor are you?

Knowing what type of investor you are helps you work out the right mix of investments.

Shares? Bonds? Property? Term deposits?

How do we know which is right for us? And how much of each should we hold?

Knowing what type of investor you are will helps you work out the mix of investments (and kinds of investments) you should consider – what to invest in and where to invest.

Sorted’s investor kickstarter tool can help you learn your investor type, give you a typical mix of investments for each investor type and show you what you can expect when investing money.

6 things to do as you invest


Set clear goals: why are you investing?

Decide what it is that you’re trying to achieve. Think about financial goals, like saving for a car, buying a house or saving for retirement. It helps to ask, ‘What goal will investing help me achieve?’

We can set our investing goals in the short term (1–3 years), medium term (4–9 years) or long term (10 years plus). Writing them down as “I will have $X in X months’ time for X” can help set a target to aim for.

Then we can invest in a way that can help us reach those goals.

Ask yourself these questions

  • Where do you want to be at some point in the future?
  • What is the final outcome you want from your investments and what is your timeframe?
  • Think about any debt you’re carrying – is investing the right option 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? 

The Goal planner can help you set your goals and help with your next steps to reaching them.


Find the right balance (between risk and return).

The greater the returns we chase, the more risk we have to be prepared to accept. In the short term, higher-risk investments tend to be more of a roller coaster. Yet over the long term, they can typically come out with better results.

A great place to start is to find out your investor type, which gauges your attitude toward risk and how well you can handle any ups and downs or possible losses. To find out, answer the nine questions in Sorted's investor kickstarter.

That way you can base your investment decisions on your attitude toward risk.


Learn your asset mix.

You need to find a mix of investments (what experts call ‘asset allocation’) to match your investor type. Look at typical mixes of shares, property, bonds and cash for each investor profile in the kickstarter results.

Specific mixes of investments lead to different results, and the investor kickstarter tool also gives you an idea of what to expect.

Ask yourself these questions
  • What mix of investments suits your investor type?
  • Bonds, shares, property, bank deposits?
  • Will you invest money directly yourself or use managed funds?

Remember to diversify and spread your risk.

A good way to reduce the risks we take is to spread our money within a given kind of investments (what experts call ‘diversifying’). So when investing in shares, for example, instead of buying part of just one company (a ‘share’), we can buy shares in different companies, a variety of industries and even different countries.

While some investments will do badly, others will do well. Spreading investments in this way helps to smooth out the ups and downs in value that happen, and helps protect us from losing money.

Spread your risk

As the saying goes, we shouldn’t put all our eggs in one basket. Distribute money around different options and different companies. For example, if you’re considering high-risk investments, you can balance the risk with other investments in lower risk areas, like cash and bonds.


Do your research into the investments.

We need to do our homework, or get a professional to do it for us. Or both!

There are so many choices to make – such as whether to invest in professionally managed funds such as KiwiSaver or to take more of a DIY (do-it-yourself) direct approach. Then there are the many kinds of investments to choose from, such as bank deposits, bonds, property or shares.

While studying the options for investing, keep in mind that looking at past results is not a reliable way of predicting what the future will bring.

Do some homework 

Research, compare and contrast the options – or get someone to do that for you. Read the business sections of the newspaper, go online, talk to an adviser, bank manager, or accountant. It’s also wise to read any documents relating to an investment you’re considering, such as the investment statement and/or prospectus. These are easily available for KiwiSaver and other managed funds on Smart Investor.

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?
  • Are they on the Financial Markets Authority's warning list?
  • 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?

Grow your money!

Investing harnesses the power of compound interest over time. Starting early helps – the longer the timeframe, the more the value of investments can compound upwards and grow.

Regularly adding to investments can greatly improve the results. If you regularly reinvest your returns or constantly drip feed more money into your fund, you will see the highest growth.

(Of course, you want to keep your whole financial situation in mind when making investing choices. For example, paying down your mortgage may get you ahead and improve your net worth faster than investing.) 

Ask yourself these questions as you get investing

How long do I want to invest for?

How long we invest our money for is called duration. A short-term investor (1 to 3 years), is better to look at a more stable investment product that offers consistent returns. If investing money for the long term (10 years plus), we probably have time to go with the ups and downs of shares and property investing for the promise of better returns. Read more about duration in investing in our guide to your investor type.

Do I need to get my money out quickly?

How easily we can turn our investments into cash is called liquidity. For example, a bank savings account is a high-liquidity investment because we can get to our money easily and probably won’t have to pay any penalties for taking it out. Low-liquidity investments include property (because it takes time to sell and may be expensive) and superannuation schemes where our money is locked in until we retire. Read more about liquidity in our guide to investor types.

What risks am I taking with this investment?

No financial institution or investment is entirely risk-free, but the level of risk  can vary greatly. If an investment seems too good to be true, it probably is.

The main risk is that our money may not be there when we need it. Our investments could lose value, or we may not receive all of our money back.

Lower-risk investments like bank deposits are less likely to suddenly fall in value than higher-risk investments like shares. But if we can tolerate higher risk, there is a better chance of achieving greater returns in the long run.

Some investments like bonds may be given a rating by an independent agency. These ratings are a useful tool in an overall assessment of the investment risks.

Do I need income from this investment?

If we’re after a regular income from our investment, it’s best to put the money where we can have more certainty about the interest it will earn, such as a bank deposit or a bond paying a fixed amount of interest for a set period. But if we want our money to grow as much as possible, we could consider more volatile investments such as shares or property, which potentially offer higher long-term returns but fluctuate in value over time. Find out more about returns in our guide to investor types.

What are some different kinds of investments?

It’s a good idea to understand the different kinds of investments, like:

Find out more about the different kinds of investments in our guide.

The Financial Markets Authority has information about more complex kinds of investments. 

What costs come with this investment?

Knowing the fees involved with investing is important. So is knowing how we’ll be taxed on our investments. 

Weigh the fees being charged against the likely return from the investment. How much seems reasonable to pay?

The fees information can be found in the investment statements – good investments will be transparent.

Take a look at our KiwiSaver fees calculator to find out how much you'll pay in fees over your KiwiSaver experience, for example.

What are my options for getting advice?

We can get investment advice from a range of people, including financial advisers, insurance companies, sharebrokers and banks. Check that the adviser is authorised to provide what you need. For investments like KiwiSaver, managed funds, shares or bonds, licensed financial advisers are best. "Nominated representatives" of a company, like a bank, can also provide investment advice, but only on products they provide. These may include KiwiSaver, managed funds and savings accounts. Find out more about getting investment advice in our guide.

Ways you can invest

You can invest money 'directly' through an online platform, or with 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. Here are our guides to investing in term deposits, property, and shares.

You can also invest money ‘indirectly’ through a managed fund. These can also be found through KiwiSaver and managed fund providers, or in online platforms such as Sharesies, Hatch, Kernel, Stake or InvestNow. 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. Here's where to find out more about KiwiSaver and managed funds.



Watch the video summary of 6 things to do when as you invest:

Watch Video

Don’t know where to start?

Check out our 6 steps Get Sorted programme to get you on track.

Head to the 6 steps