I am so over these ‘stock tips'

Them: ‘Cannabis is going to boom’,

You: ‘Is it? I better get some too….stocks that is’.

Them: ‘Yeah my Uncle works for Contact energy and said Elon Musk visited their headquarters via a solar panel powered electric rocket last week’,

You: ‘I didn’t know that was a real thing but I better buy Contact Energy shares’. 

Them: ‘Yeah i’ve got 45% gains in my share account, i’m basically a ‘day trader’ these days’,

You: ‘Mine is only 13%, send me your stock list cuz?’

You: ‘I am over all of these ‘stock tips’ I keep hearing and don’t want to be a part of it’.

Well luckily for you, there is an easier way. Did you know you can buy stocks in a group of companies all at one time?

You can do this by purchasing an exchange traded fund (ETF) which contains a portfolio of securities designed to track specific indices. I.e. the top 10 or 20 stocks/companies in NZ (or even Aussie/USA etc). 

The fund (ETF) buys shares in each of the companies in proportion to the index in the hope to mirror the performance of this group of companies in the index. 

This means you are ‘diversifying’ and tracking the performance of a number of companies at one time.

There are A HEAP of ETF’s available to you via the NZ stock market. Even the US market - remember that you will buy them in $US if buying from the US markets. 

EXAMPLE

The ‘Smartshares NZ Mid’ Cap is basically made up of NZ’s top 50 companies, but excludes the top 10 - gets rid of the big boys.

I personally buy this fund as i’m a middle of the road sort of lad who was never tight with any of the top 10 untouchable cool kids when at school. I found many of them to turn out to have mummy or daddy issues long term anyway... 

Check out the performance over 5 years. Pretty consistent growth right?

This ETF gives the buyer a stake in multiple industries providing some exposure to a broad range of businesses.

To give you another lesson - a business on the stock market generally exists to maximise it’s value to the shareholders. Not all survive but the people in these businesses are all trying to improve their value and their profits that flow to shareholders as dividends. 

ETF’s usually charge you a fund (a percentage) each year to be a part of them. Perhaps a small fee to pay to track the performance of multiple industries and businesses.

What did you just learn?

You don’t need to be Warren Buffet to figure out the sharemarket. In fact you don’t need to know what you are doing. You just need to hope the people in the companies you invest in do…

ETF’s could be a good option if you want to be a part of the market but don’t want to pretend to be a know it all like the people at the top of this e-mail.

If you have 40 companies improving slowly over time, you'd expect the ETF fund to do the same - grow slowly over time. Keep your expectations realistic. 

Activity 

• Google 'New Zealand etf list' and do some research of your own
• Review whether there is an ETF or area of the market you’d consistently like to invest into
• Is your Kiwisaver utilising ETF’s? Most probably and perhaps you didn’t know

Keep it simple this weekend,

Luke

P.s. You are one of 1,512 recipients. There are 19 people working through KTC Night School.

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Did you know: Kiwi company Laybuy listed on the ASX on Monday and its stockprice rise 50% within an hour of the market opening. Opening at AU$1.41, they hit A$2.30 after 6 minutes.

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