Property, shares, gold, or in the bank? What is the quickest way to build a fortune? Photo / Getty Images
Property, shares, gold, or in the bank? Zoe Hunter talks to financial experts on where is better to put your money and how to build a small fortune.
Buying shares is becoming increasingly popular among younger generations as the dream of owning their own home is taking longer to achieve, experts say.
In the meantime, more financially literate young people were looking "outside the box" and growing their money in KiwiSaver or investing in the sharemarket.
Some had paid off mortgages faster and "effectively become millionaires" in the long run.
Forsyth Barr investment adviser Paul O'Driscoll said traditionally the Kiwi investment portfolio had involved putting money in the bank or property but that was no longer the case.
O'Driscoll said he had seen a significant lift in people's interest in investing post-Covid-19 lockdown.
"We've seen a lot more focus from young people at building up their KiwiSaver and investing in growth portfolios.
"Young people are now more financially literate. They understand the risks and realise the importance in having a diverse portfolio."
O'Driscoll said a diverse portfolio was having exposure to a number of different securities.
"So should any single security not perform well or poorly it doesn't have an overbearing effect on your portfolio as such."
Head of Private Wealth Research at Craigs Investment Partners, Mark Lister, said people should still aspire to own their own home.
But he said as that goal was becoming more difficult and taking longer to achieve many people were looking "outside the box" as to where to invest their money.
"I don't come across too many younger people that have any interest in gold. Cryptocurrency, yes, but gold, no.
"But shares are definitely something that younger people are looking at in much greater numbers than they have in the past."
Lister said easy-to-use apps and systems were helping make investing in the sharemarket more attractive and younger people were generally more open-minded about it.
"You're not going to get rich with your money in the bank... because in many cases the inflation rate is actually higher than the return you're going to get from your money in the bank.
"Cash in the bank is an absolutely terrible investment strategy over any longer period of time."
However, he said the bank was a more sensible option in the short term as money didn't "move around" like shares, cryptocurrency, gold and property.
But Lister said it all depended on what was right for the individual.
Craigs Investment Partners has developed unique sustainability scores to help their clients invest in companies that align to their values of good environmental, social and governance practices in an easy-to-understand way.
Research analyst Roy Davidson said there was now a sustainability mandate for companies.
"It's become what people expect more and more."
But Davidson said it was not just about the emissions.
"It's historically got the attention, but it's also waste, biodiversity, supply chain responsibility, human rights, health and safety, having a happy and engaged workforce, business ethics."
Alisha Brady, Bay of Plenty strategic coach for enable.me, said there was not one single investment that was right for everyone.
"What you invest in depends very much on what you're aiming for, what your time frame is, what your risk appetite is, and what tolerance you have for volatility or losing your investment."
Brady, who runs the Tauranga and Rotorua branches, said some younger clients had come to her after losing a chunk of their house deposit when the sharemarket "tanked" during lockdown.
"So while many young people are becoming more aware of and keen on investing in shares, some also feel burned by that experience.
"They thought they were doing the right thing by having their KiwiSaver in a growth fund but hadn't considered the fact they needed to access it in the short term and that there was a chance values could fall – which they did.
"KiwiSaver can be a fantastic way to boost your house deposit and save for your retirement – but you need to make sure your settings are right for you."
Brady said credit card debt dropped dramatically during lockdown but it was now climbing back and while some people had become more cautious others had become more ambitious.
"We're definitely seeing people who are anxious to get their money working for them."
Kristen Lunman, general manager of digital investment platform Hatch, said she had seen "massive growth" in the sharemarket.
"We've seen people pay off mortgages and effectively become millionaires thanks to that growth."
Lunman said one family sold some of their shares last year and spent about $2000 on toys for disadvantaged families and children.
"They were not only working towards securing a future they wanted and finding financial freedom but they were also able to give back. So generosity is also key."
She advised people new to investing to start with $100 and watch how it performs in the first three months to get a taste of the sharemarket.
Kiwi Wealth acting chief executive Rhiannon McKinnon said it was wise to invest in a "little bit of everything".
"Don't necessarily have all your eggs in one basket."
McKinnon said traditionally Kiwis have left their money in property and in the bank, but people were now thinking of alternative investments as it has become harder to get on to the property ladder.
"I think managed funds are a really great step into the sharemarket. You're getting that first exposure to something other than the bank or to property."
Kiwibank's Rotorua Branch Manager Maxine Phelan said there were many savings or investment options.
"To find the one that will best suit you, have a think about what's important to you – is it a higher interest rate? Instant access to your money? No account fees?
"If you don't need immediate access to your money, a Notice Saver or a Term Deposit might suit you."
Phelan said KiwiSaver was a simple and affordable way to save for retirement.
"As with any investment, it makes sense to do your homework and choose a scheme that best suits your individual needs."
Some of the names given to the Managed Funds accounts:
My best life
My own apartment
The Oh Shit Fund
Bread printing
The biggest family holiday
Apartment deposit
Try to get rich
Justin Case
The hope for a house
Future fun stuff
Term depositish
65 and still alive
Taonga
Not an investment property
Anti-mortgage
Gringotts
Financial fertiliser
I'd like a house please
X term deposits
Better than the bank
Source: Kiwi Wealth
The jury's marathon deliberations ran for two weeks.