How to invest in stocks in New Zealand 2021 – that will be the topic of this article.
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Many people are especially eager to know how a non-resident can invest into share markets such as New Zealand.
The NZX market is the primary marketplace for stocks. It lists over 200 companies, including many of New Zealand’s oldest businesses and a number of overseas ones. Collectively, these companies are the cornerstone of the NZ and New Zealand’s economy.
The main index is NZSX 50 and includes the 50 largest companies in the NZ market.
NZX operates within a regulatory framework designed to maximize transparency, fairness, efficiency and competitiveness, as well as increase trust among all stakeholders. According to NZX rules, all companies are required to disclose information that is relevant to the value of their shares as soon as the companies become aware of this information.
New Zealand Exchange 50 (S&P NZX 50) is a key index of the New Zealand Stock Exchange (NZX), a trading platform with a capitalization of $ 60 billion. The stock indicator is distinguished by dependence on financial infrastructure (13 investment banks at once), the energy sector (seven), construction and development (12 companies).
Along with the exchange, which changed its name from New Zealand Stock Exchange (NZSE) to New Zealand Limited (NZX), the index was renamed to NZX 50. Before that, it was called NZSE 50, a little earlier – NZSE 40, according to the number of participating companies.
The developer of the first-ever New Zealand stock index was Barclays Plc., Since New Zealand has been the dominion of Great Britain since 1907. The first financial relations between the British and New Zealanders originated in the 1870s, when the first wool steamers headed towards London.
Until 1992, the stock exchange, founded in 1974, operated an index developed by Barclays specialists. After the stock exchange was corporatized and the electronic trading system was introduced, the New Zealanders introduced their own indicator, called the NZSE 40. In March 2003, with a change in the structure of players, it turned into the NZX 50, and even later into the S&P NZX 50.
In the calculations, experts cite data from 1974, when the disparate exchanges of New Zealand were combined into a single syndicate, and 300 points were determined as the basis. Until 1985, there was a gradual rise to 2,169 thousand points, then a slight decline, and growth until 2007 (4,243 points). By 2009 – a drop in quotations to 2,417 points, then a steady rise.
- a local market that is little affected by the global conjuncture;
- shows decent growth for 7 years;
- includes both banks and the real sector;
- ups and downs are easily predictable;
- easy to calculate thanks to the S&P.
Index calculation method
Recently, the NZX 50 index is calculated according to the S&P Dow Jones methodology, which is reflected in its name. The level of the index depends on multiplying the price of shares P by their number Q per unit of time i, and reduced by a divisor. It is a coefficient reflecting fundamental and key changes in the market.
It is noteworthy that the method of calculating the divisor is patented by Standart & Poors, and, most often, it is hidden from outsiders. Its principal purpose is to balance the index and eliminate unmotivated ups and downs when changing the stock portfolio, mergers and acquisitions. Each trading day the index is calculated individually.
Also, the calculations take into account a separate indicator of the liquidity of the index participants. It can be relative or absolute: in the first case, the shares must enter the best half of the market players within six months, in the second, they must exceed the market average by 2.5%. The six-month period is used to eliminate the risk of “pumping” the company with quick money.
- a local index of little interest to large investors;
- trade is conducted at an inconvenient time for Europe;
- shows very moderate ups and downs;
- with a large number of banks, it is not very speculative;
- rather conservative in terms of the participation of foreign companies.
There are several dozen different indices on the NZX exchange. The most important of these are the New Zealand Stock Market (NZSX, which includes all stocks on the stock exchange); New Zealand Alternative Market (NZAX, New Sector Enterprises) and New Zealand Debt Market (NZDX – IOUs). There is also derivatives trading, and all indicators have different trading times.
Stock purchase process
Investments in the NZX can be completed directly through a registered broker, which you can easily find on New Zealand Exchange official website.
Many managed funds are listed and traded as Exchange Traded Funds (ETFs). Others are offered by fund managers – your legal or financial advisor can help you.
To buy shares in a private company that is not listed on the exchange, you need to consult with a business broker or lawyers and financial professionals to find out which companies can be open for investment.
Below we will try to show you a step-by-step guide on how to invest in NZX.
Step one: decide how you want to invest in stocks
There are two ways to buy stocks; Do it yourself or invest in a managed fund (or ETF). The difference is how much you want to participate and what you want to learn.
Find out the more suitable way for you:
- Either you would like someone to invest on your behalf and manage stocks for you? (which is called “passive” option), or,
- You are interested in selecting specific companies to invest in, as well as tracking their financial performance and share price dynamics?
It is likely that for the first time an investor in stocks will like option 1. Most people, having made their first investments in the stock market, will be interested in its work. After several months of regular investment, your knowledge may well expand significantly.
Once you decide which is right for you, such as passive or self-picking stocks, you are ready to consider investing options.
Step two: register on the investment platform
To be able to invest in stocks, you need to register on the appropriate investment platform. The best option for you is the one that gives you the stocks, funds and ETFs you want to invest in. Here are the platforms that are most popular:
- Sharesies (Offers managed funds, ETFs and select stocks in the New Zealand, Australian and US markets)
- Smartshares (ETF, investing in New Zealand and overseas markets)
- Hatch Invest (US Listed ETFs)
- InvestNow(Managed Funds, New Zealand & International Investments)
- Kernel (index funds with a focus on New Zealand)
- ASB Securities (offers ETFs and equities, New Zealand and international markets, and margin lending)
- Direct brokerage (offers ETFs and equities, New Zealand and overseas markets)
Step three: set an investment budget
Anyone new to NZ stock market investing usually has two questions: How much money do I need and how much do I need to invest?
Most stocks in the New Zealand stock market are valued at less than $ 25, and platforms such as Sharesies allow you to purchase a fraction of one share. For example, a 10% stake in Air New Zealand will cost about 30 cents.
When considering how much money to invest in stocks, how much money you can invest depends on what you can afford. Typically, if you can set aside a certain amount of your income every month and use it to invest, you will have the usual money to invest.
It is also suggested to hold about 75% or 80% of index stock funds and 20% or 25% of assets such as bank deposits and time investments. This assumes that you are young and want long-term profits.
If you are looking to buy individual stocks, it is wise to limit your investments because it is risky. According to the general opinion of financial experts, you should invest no more than 10% of your total investment in individual stocks.
Step four: understand what happens when buying individual stocks (and why index funds and ETFs are easier)
If you want to invest in a specific company, you can buy a certain number of shares to dive into the stock market. You will need to decide how much you want to invest – $ 30, $ 1500 or more? And then buy the stock at the price you want to pay.
If you are looking to expand your portfolio and invest in other companies, just repeat the same process. Keep in mind that every time you buy and sell a stock, you will be charged a “brokerage” fee – usually as a percentage of the order value. For example, if your brokerage income is 1% and you buy $ 1500 worth of stock, you will pay $ 15.
While index funds and ETFs offer diversified investing (and therefore risk reduction), they are unlikely to grow to equally high performing stocks, which could double in value in a few months.
Remember: the chances of picking a single stock that will make you rich are quite limited, and therefore index funds or ETFs are usually the smarter investment. In many ways, this is how the fund management industry works – no investment manager invests his client’s money in one company stock. Instead, they diversify it across one country, one sector (like property or technology), and beyond. The goal is to achieve consistent profits while minimizing the exposure on one company.
Step five: start investing
Many of the most successful investors have done little more than following the basics outlined above.
Investing in the low-cost S&P 500 index fund is the best investment most investors can make. The only thing you should consider is your belief in the company’s long-term growth potential.
Investing should never be speculative, and building a portfolio of diversified low-commission funds that monitor the New Zealand and overseas markets is a popular way of investing.
If you are looking to invest in specific companies, start your research to make sure you know what the company’s prospects are.
There are many companies in New Zealand that have registered on the stock market and have gone bankrupt a few years later. But we are here to focus on the positive.We have made researches and found some of the best shares to invest in 2021.
Top 5 New Zealand Shares to Buy in 2020
The stock exchange is a very famous place where various stock brokers and traders can profit from. And probably there are many investors looking for shares that have a good potential. So that there are many other stock exchanges in the world that are very popular and profitable.
One country that stands out from the crowd is New Zealand. The stock exchange in this country makes a huge contribution to the economy and thousands of people make a living buying or selling stocks. Let’s take a closer look at the New Zealand stock market and make a list of the top 5 companies to invest in 2021.
If you are looking to buy shares in a particular company, the first step is to find the one with a really good future. The New Zealand Exchange, also known as NZX, has over 200 listed securities with a market capitalization of over NZ $ 160 billion.
What started out as a series of regional stock exchanges during the gold rush era is now the main place where you can buy and sell stocks in New Zealand. Some are very familiar with the way the New Zealand stock market works, and some are not. Luckily, we’re here to help everyone, and give a ready list of the best shares to consider while investing in NZX.
As we mentioned, NZX has many listed securities and we are here to list the top 5 we have pointed out, of which you can easily make a profit.
Chorus Limited is a telecommunications infrastructure provider in New Zealand. This company is listed on the New Zealand Exchange 50 Index and owns most of the telephone lines and telephone equipment in New Zealand.
The company withdrew from Telecom New Zealand in 2011 and cannot legally sell directly to customers – it provides wholesale services to retailers. Its immense reputation and great success over the past few years occupies a top place in this list.
SkyCity Entertainment Group is a huge company when it comes to the casino industry in New Zealand. This group was formed in 1996 and has seen significant growth over the past decade.
Skycity recorded $ 1 billion in revenue in 2019, a record high result. Statistics predict 2021 will be even better. They have casinos in New Zealand and Australia and you can buy their shares on NZX.
Fletcher Building Limited
Fletcher Building Limited, with a market capitalization of over NZ $ 2.5 billion, is one of the largest listed companies in New Zealand Exchange. The company employs over 15,000 people worldwide and, as the name suggests, Fletcher Building Limited operates in the construction industry.
The major success and profits this company has made since its separation from the Fletcher Challenge in 2001 is why it deserves a mention on this list of stocks to buy. This company operates in various divisions: building products, concrete, distribution, construction, housing, etc.
Vista Group International Ltd
The next one is Vista Group. No doubt filmmaking is one of the most lucrative industries in the world. Add to that the fact of access to technology has allowed them to make films that we never thought we would watch, and you have a winning combination. To put things in perspective, the filmmaking industry made a $ 100 billion profit in 2019. Experts believe that their price will rise in the coming years, and this is more than a reason to buy shares in it.
Vista Group International Ltd. is one of the favorites on the New Zealand stock exchange. This company provides technology for studios, distributors, exhibitors, from all over the world. Their headquarters are in Auckland, but they have offices all over the world.
Heartland Group Holdings Limited
Serving New Zealand and Australia, Heartland Group Holdings Limited is a financial services group that specializes in “best or only” banking products across three markets: household, rural and business. This company received its first listing in 2011 and its strategy includes providing innovative products in the 3 aforementioned markets.
Tips for beginning investors
We are trying to make you informed and prepared for the investing process. So below are some very useful advices that every beginning investor should consider before buying shares.
Have an investment strategy and stick to it.
A strategy is an investor’s roadmap, without which it is dangerous to start a journey in the stock market. Before investing the first money, decide on an investment profile, opportunities and conditions, goals and investment horizon, tactics and strategy of work.
Invest only in aspect you understand.
If you are too lazy to understand the business that issued the security, it is better to refuse to invest on your own in favor of other options. If something seems too complicated, perhaps someone is trying to confuse you, or it is simply that this asset is not right for you.
Consider buying stock as buying a stake in a business.
Remember what a share is in essence – a security, which gives its owner the right to participate in the management of the company and the distribution of part of the profit based on the results of its activities. Think like an owner and don’t forget which businesses are behind the stocks in your portfolio.
Treat the investment process responsibly.
A large number of professionals with vast experience work on the exchange, and their goal is to make money, including on the stupidity, naivety, greed and incompetence of other participants.
Invest in yourself / educate yourself.
The science of investing covers a wide range of areas and interests – from philosophy, psychology and history to geology, chemistry and mathematics. A good investor is a researcher who simply cannot afford to be narrow-minded. Therefore, if you have already embarked on this path, be prepared to regularly invest time and money in your own education.
Invest only your own funds.
This is especially important if you have not yet learned how to objectively assess risks. Work without using borrowed funds, and this can allow you to avoid many dangers and worries, and with proper diversification, it can also practically reduce to zero the risk of losing a deposit on a brokerage account.
Remember to diversify.
Don’t put all your eggs in one basket is one of the most popular financial advice, and that’s because it works great. Control not only the number of issuers in the portfolio, but also the size of their shares, as well as the dependence of issuers on one or several factors. For example, a portfolio cannot be considered well diversified if a significant share of the companies included in it belongs to one holding, belongs to the same economic industry, or produces similar products in the general market.
Be realistic about the potential profit.
The main challenge that the stock market can help an investor solve is to move capital over time and protect it from the destructive force of inflation. Do not expect quick super profits from working in the stock market, especially if you are focused on a long-term strategy and do not have the gift of predicting the future.
Only invest money that your family can afford to lose.
The stock market can be a great place to invest “surplus” funds, but it is a big mistake to place on the exchange the money that is needed for current consumption and on which your family’s well-being depends. The more independent your capital is from external non-market factors, the less likely it is that you will have to urgently sell your portfolio of shares at the most unfavorable prices.
Don’t waste your money.
This is the main rule from the most famous investor in the world, Warren Buffett. And his second rule: “Never forget from the first rule.” Be prepared for losses at any time, because investing is a risk. But do your best to keep it to a minimum.