Need advice on investing

[antiquarianbookfan]

Quick context,

33m does not own a house. Family of four eldest 2 y.o and a 1 week old. Wanting to invest 50 dollars per week and possibly use the money for buying house in 3.5-5 years time. Also like to have ability to withdraw it in case emergency happens as we dont have current savings. Only have 5k on our bank and possibly planning on depositing 1k-2k as astart up investment and just continue to deposit 50k p/w. Both have full time job whilst wife is on maternity leave. I earn 43$ an hour and wife recently got hired earning 54$ an hour. I know this has been discussed a lot but hoping to have an insight on a possible suggestion. Thanks. (Only read up about kernel cash plus fund atm)

Edit: currently have an asset that will sell and will probably have around 70k nzd by the time il widraw my investment. Current kiwisaver is around 35knzd combined

 

[t2k16mes]

@antiquarianbookfan The 5k in the bank is a good start, I would probably recommend leaving that there rather than taking 1-2k out to start up as a 3-4k safety net with kids seems on the low side.

Not to be too much of a downer, but $50/week invested won't be nearly enough to buy a house in 3-5 years. $50/week * 52 weeks/year * 5 years = $13,000. Even with an assumed return of 10% per year that's not going to be enough for a deposit on a house for 4 people. Without knowing more about your situation (eg rent costs, childcare costs) it's hard to say for sure, but you and your wife both earn good salaries so should probably be able to save more than $50 a week. A suggestion to consider (not financial advice) would be to save alot more and potentially push out the house purchase for around 10 years (maybe aim to lock it in before the oldest starts high school). For example, if you can invest $1,000/month for 10 years and get a 10% return each year, you'd have about $200,000 in 10 years [Source] . 10 years is also more time to ride the ups and downs of the stock market. You wouldn't have to withdraw at 10 years exactly, could do it when you're comfortable with the investment returns (ie not in the middle of a market crash)

Whatever you do end up investing, you want to put some of it in the stock market. Managed funds are ok but can have pretty high fees, which eat into your savings over time. I'd recommend signing up to InvestNow (https://investnow.co.nz/) and buying their 'Foundation Series' Funds. The Foundation Series Total World Fund buys shares in hundreds of companies from all over the world, to achieve good returns without being affected if a few of those companies fail. It has low fees (0.07% per year compared with 1-2% on a managed fund) but does have a 0.5% fee on buying and selling. Worth it if you're locking your money away for several years, but if you don't want that 0.5% fee, look at Smartshares through InvestNow. I definitely wouldn't recommend Sharesies, their fees are really high (1.9% to buy and 1.9% to sell).

A safer option (but with potentially lower returns) could be a bond fund. Kernel and Smartshares both offer good ones. These from Kernel for example (https://www.goodreturns.co.nz/artic...ches-nz-first-target-maturity-bond-funds.html) are nice because you know when you'll get your money back, and roughly what it will be worth when you get it back. Right now interest rates are quite high, and this allows you to lock in an interest rate of 5% or more in bonds. A term deposit on the other hand will lower their rates as interest rates fall.

The rule of thumb is 60/40 split between stocks and bonds, but it depends what you're comfortable with. Good luck with the investing! It can be overwhelming at first, but is well worth it

 

[antiquarianbookfan]

@t2k16mes Sorry should have clarified. We have possibly 70-90k asset available by the time we decide to buy a house. We also have 35k combined kiwisaver as of now. Just wanted to invest small amounts for the meantime rather than putting it in a bank.

 

[antiquarianbookfan]

@t2k16mes Il have a look. Thank you so much for this.!

 

[snamjan28]

@antiquarianbookfan $50 a week wont get you a house deposit in 5 years unfortunately. Your going to need a lot more.

That aside, if the 3-5 year time frame were realistic you would be looking at bank style funds cash\T.D's as the stock market is to volatile over such a short time frame

 

[antiquarianbookfan]

@snamjan28 Sorry should have clarified. We have possibly 70-90k asset available by the time we decide to buy a house. We also have 35k combined kiwisaver as of now. Just wanted to invest small amounts for the meantime rather than putting it in a bank.

 

[snamjan28]

@antiquarianbookfan all right, the 2nd paragraph still stands. the stock market can be under water for a lot longer than your time frame, so it may seem boring, but you would get the advice anywhere that for 5 years stick to term deposits, cash finds, notice saver etc.

 

[antiquarianbookfan]

@snamjan28 Thanm you so much. Can you recommend me a bank style funds example?

 

[snamjan28]

@antiquarianbookfan you cant add X a week to a term deposit, there some quite good notice saver options

https://www.rabobank.co.nz/noticesaver/

https://www.kiwibank.co.nz/personal-banking/investments/savings-accounts/notice-saver/

https://www.westpac.co.nz/kiwisaver-investments/term-deposits-pie-investments/notice-saver/

https://www.heartland.co.nz/savings-and-deposits/notice-saver

etc.

look for PIE funds if your in the higher tax brackets.

some newer 'cash' fund options like:

https://kernelwealth.co.nz/funds/kernel-cash-plus-fund

https://www.sharesies.nz/save

https://www.squirrel.co.nz/invest

https://milfordasset.com/funds-performance/cash-fund

etc.

watch the credit rating or underlying asset mix on this lot, there is a bit of smoke and mirrors here

 

[mimijo]

@antiquarianbookfan You probably need to give more context, like how much do you need?

First advice would be to review your household expenses and see if you have any room to reduce fix or general costs.

 

[antiquarianbookfan]

@mimijo I pretty much covered it at least. I have a lot of financial responsibilities . I only have 50 to 100 per week to spare and invest and just wanted to know which is best one to go

 

[mimijo]

@antiquarianbookfan Assuming you have a kiwi saver etc and max that out and have a normal index ETF.

Take time to build out your funds.

Save probably 3 months worth of household income before you start to invest. In the meantime, just save into the market rate account.

The reason why you want a pool of cash to invest is that you want options. Also, it gives you time to research and evaluate your personal risk tolerance.

Investing is about the psychological ability to handle risk and stress.

An example are shares, you need to be prepared for your portfolio to be cut in half but still have the ability to hold on for a long time.

 

[in_jesus_i_trust]

@antiquarianbookfan Leave the $5k in your bank for an emergency fund but shift it to an on-call savings account, this will get you around 4.5% interest

Jus to clarify on other comments, 3-5 years is too short to be investing in the stock market, because when you come to use the money to buy a house you could find that the stock market has collapsed and takes some time to recover. Usually 5-10 years is the recommend timeframe for the stock market so you can time your exit independent of any down years.

So I would recommend using any of the savings accounts recommended here

https://www.reddit.com/r/PersonalFinanceNZ/comments/1bgobon/_/kv8tvi1

 

[antiquarianbookfan]

@in_jesus_i_trust Thank you for this. I was planning to put all my savings here.
https://kernelwealth.co.nz/funds/kernel-cash-plus-fund. Do you think its safe? Does it work like a notice saver? Have previously used notice but was kind of difficult during emergency as the money dont show up straight away. Currently my money is in a free up account which doesnt have interest.

 

[in_jesus_i_trust]

@antiquarianbookfan Kernel as a company is plenty safe. The banks they are using to invest your money are a bit of a mixed bag with some good A banks and some lower B banks, but I'd say it's pretty unlikely any of those actually go under in reality.

Note that the return on that fund is the annualized return from the past year, not a guarantee of future returns. It will fluctuate with the OCR, if that goes down then the fund will return less, but so will all comparable bank savings accounts/term deposits etc.

A fixed term deposit that is fixed for a certain time will provide a guaranteed return, but will be lower than that fund.

Overall looks like a great option. It has a 2-3 day notice period for withdrawals, so depending upon how much money you might need at short notice you may want to keep this in an on-call account eg $1-2k.

By the way, never have your cash just sitting in a normal account. Most banks have on-call savings accounts that give "premium" interest if you don't take money out, but are still flexible enough to remove money if needed. EG for ANZ, https://www.anz.co.nz/personal/accounts/savings/serious-saver/

 

[antiquarianbookfan]

@in_jesus_i_trust Can you give me an example of a similar oncall savings on kiwibamk? Im banking with them and i cant find any similar option. Thanks

 

[in_jesus_i_trust]

@antiquarianbookfan There's no real need to stick your main bank because cash transfers within NZ banks are same day now.

 

[antiquarianbookfan]

@in_jesus_i_trust okay thanks

 

[kelvingivens]

@in_jesus_i_trust Thank you for this great analysis. Would you say it's needing review when the ocr rate drops and consider alternative safe investments?