The best type of news for us is business news, says Sharesies co-founder and executive director Leighton Roberts. Photo / Supplied
Since share markets around the world tanked in March as investors fretted that Covid-19 could lead to financial chaos, the bounce back has been aggressive, and in some particular cases, perplexing.
After plunging around 30 per cent in the month to March 23, by June 8 the NZX-50 was down less than 5 per cent from its peak of late February, and higher than it had ever been before the start of the year.
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This meant the New Zealand market was "technically" back in bull market territory, as if it never really left it, with the sharemarket seeing years of strong gains dating back more than five years.
Similar jumps were being seen around the world. While in some cases a recovery was inevitable as it became clear that Covid-19 was not leading to financial armageddon, market commentators began to blame a new phenomenon.
In the US stories began circulating that retail investors on online platforms were, in some cases, outperforming world experts. Part of the blame was even put down to the lack of professional sport sending bored punters looking for ways to gamble.
In New Zealand, it seemed one name was on every market report for an unexpected jump in a company which would not be assumed to prosper in a post-Covid world: Sharesies.
The Wellington-based online investment programme has been running for three years this month, promoting the opportunity to dip your toe directly into market investing from only a few dollars at a time.
With pink livery and a website focused on being as simple as possible, initially Sharesies only allowed investors to put money into a series of funds, later adding shares from the NZX.
Sharesies now appears to be Covid-19 success story.
Leighton Roberts, Sharesies chief of operations and acting co-chief executive (his wife Brooke Roberts, Sharesies' chief executive, is on parental leave), acknowledges the start-up has captured a massive surge in interest since the country headed into lockdown.
Recently Sharesies passed $500m assets under management
Rather than cause its initial investors to rush for the door, turmoil in the markets caused a rush to the platform. Initially its customer base was growing at 7-10 per cent each month, but in the past few months "it's been more like 25 per cent".
"I think it took us 10 weeks to get our first million dollars," Roberts said this week.
"Now, we'd grow ten to fifteen million a day, I suppose.
"The acceleration really from the lockdown, business has been back in the news," Roberts said.
"People knowing, when markets are down, it could be a good time to buy and then the fact that you can just do it with a few hundred bucks, as opposed to a few thousand, means the risk dynamic changes for people.
"It's not like I'm putting my house deposit on the line."
Viewed sympathetically, Sharesies may one day be credited for bringing back the retail investor to New Zealand. The platform now has more than 175,000 customers.
Perceived as a market for young people, Roberts says the platform is used by more than 10,000 children - where many accounts have little money in them and are largely educational - and "almost no students".
Its core market are people aged 25-35, but the average age is increasing. Initially 80 per cent of its customers were below 40, but this has now dropped to 72 per cent.
Rather than just being something to try out, people were coming because they realised that savings accounts were going to give people little help to achieve their financial security.
While this year has highlighted that for businesses "cash is king" during a time of turmoil, regular savers understand more than ever before that interest rates are dropping, and Roberts believes they understand the risk that their investments could be being further eaten into by inflation.
"We've got an emerging group between 40 and 55, who of course have a little bit more money, but they also started to have this absolute realisation of retirement.
"Many of them will already have houses, but as far as savings accounts being their main way forward, trying to achieve whatever number they have in mind for retirement, they're realising that's unlikely."
For these new investors, New Zealand's generally healthy proportion of dividend paying companies were being seen as an alternative.
"People are looking for other ways to do that and they're redefining their risk parameters, and realising 'well, I don't want to get basically nothing from a bank, I'm going to have to assume some risk."
Could Sharesies be responsible for a surge in the markets? There is no doubt the organisation is adding buying pressure to the market.
In the three years since the company was founded there have been only two days when assets under management have dropped, and those days were due to market movements.
Roberts says every day net deposits have exceeded net withdrawals, but he questions how much of an impact that is having on price.
"It's nice to be talked about, but I think that's overly flattering for the size of Sharesies."
While Roberts said Sharesies may now account for around 4 per cent of trading volume on the NZX, there were two sides to price setting and Sharesies did not have the power to move markets on its own.
"As far as price setting and stuff, if institutions making all these comments at the moment really believed that, then you would expect to see much more institutional selling than what we are," Roberts said.
"That would really drive prices down. The buying power of Sharesies is not big enough, by any stretch, to offset an impact that would have, so there's clearly other big players that like [New Zealand] still or at least want to hang around or aren't ready to cut losses."
For Sharesies customers, news, good or bad, drives interest.
A lot of the focus of the so-called "Sharesies effect" has been on Air New Zealand.
With an effective promise of Government support, shares in the airline more than doubled from a low of 80c to almost $2, despite the company acknowledging it is a long way from profitability and may need to raise hundreds of millions of dollars.
Analysts have warned that means shareholders could face a major dilution of their investment.
Roberts acknowledges that the interest of Sharesies investors is not even across all of the companies and funds it allows people to invest in.
"Retail investors will invest for different reasons to institutions, right? People can put money in brands, often, purely on a company that they want to survive, and that's more consumerism type behavioural economics," he said.
"We are seeing these companies come through, that maybe, [there is] some thought that New Zealanders really love.
"Air New Zealand really has a loved brand, Kathmandu is another one that has a really loved brand, certainly through our retail investor base. It's showing how important that can be."
What is driving activity is publicity. Not only is business news more prominent, in some cases it is bulletin leading.
"The best type of news for us is business news. Headline bulletins in the six o'clock news. We see a direct correlation between companies on that and the next day in the market, regardless of whether [the news] is good or bad, to be honest."
"When Air New Zealand is getting a lot of air time, we had a lot of interest in the Auckland Airport capital raise, Kathmandu was in the news" as was cinema company Vista.
While six of the top 10 Sharesies investments are investment funds, there is conspicuous interest in some areas.
Roberts said the biggest "outlier" in the portfolio - the one where its investors hold a disproportionate proportion - is Cannasouth, a medical cannabis company, which was Sharesies 15th biggest holding.
Sharesies does not provide specific financial advice, but broad advice on behaviour and strategy. It is up to its customers to decide where to invest.
"We feel a real responsibility on education. It would bother me more if a huge proportion of our investors looked like they were there for a speculatory reason. Ninety per cent of our investors say they are there for long term investing."
While Air New Zealand shares have dropped back from their highs, Roberts said many retail investors were still doing well from the investment.
"I'm not saying it's going to be true yet, that's yet to be seen, but, right now, the people who flooded into Air New Zealand at 80 cents are looking pretty smart."
What if there was a situation like Hertz in the US?
At the start of June the rental car company's listed debt (which is paid out before shareholders in the event of a collapse) was trading for a few cents in the dollar, suggesting an expectation the company was bankrupt. Yet shares in the company surged more than 500 per cent at the start of June.
If such a surge happened in New Zealand, would Sharesies intervene?
"We'd say the same stuff in the good times as the bad. It's a dangerous game. You are either there and taking on the responsibility of advice, or you're giving really broad-based, behavioural type ways of helping people."
Sharesies advises customers about diversification of investment "as our key risk mitigant for retail investors, and dollar cost averaging.
"We talk about risk every chance we can, we talk about uncertainty, and how uncertain the environment is, for people to be really aware of that."
Roberts has a long history as a retail investor. Aged just 17, and hoping to quickly buy a house, he joined 10 friends in creating a share club in which each have been putting in $50 a week, with no one missing a payment in 16 years.
While he acknowledges the perception that shares are now overvalued, the same thing could be said about house prices.
In the short term investing in shares might be expensive, but Roberts believed that those who approached it for long term investment would come out fine.
"If I was thinking the next one or two years [as an investment horizon] I wouldn't go near the stock market. Nowhere near. I cannot see how this shakes out.
"I think in 10 years though, through a good, robust, continuous investment strategy, they'll probably come out good."
Since before Sharesies was founded, people had been warning that shares were overvalued, but markets had continued to rise, so Roberts maintained his belief that the best time to start investing is now.
"People have missed out on some pretty incredible opportunities, particularly over the last five years, from experts saying that the market is overpriced, and we are not even close to being back where we were five years ago. Not even at the bottom of the drop were we where we were five years ago."
Roberts said observers should not think of the money it manages as being funds that would otherwise be in a different investment.
"Often people who put money into Sharesies are not trading off against a savings account and shares. It's something else. We have loads of customers who are giving up Lotto tickets for Sharesies… or another type of bad behaviour."
There were far larger risks in the economy than an "average $3000 Sharesies portfolio".
"If I looked at the risks in the economy at the moment, I'd have to say it's servicing of property, servicing of mortgages," Roberts said, claiming that there seemed to be a certain bias about investing in markets.
"People get much more judgy about people drawing down $30,000 for an NZX-50 ETF [exchange traded fund] than they do for a new boat, much more judgy. The boat's far more common, I can assure you."
A small proportion used the company's platform for day trading, even though it was not designed for (or advertised as) being for trading and some people had lost money.
"People have lost money in Sharesies, all the time, everyday. People were down 40 per cent and still buying."
Roberts believed that many of the people who had experienced a sudden loss in the market would be better people for it.
"All the people who lost 40 per cent of their money and managed to hold in, or sold out and lost, learnt some extremely valuable lessons. Probably ones that might change their financial future.
"Firstly, by observing that shift. My $100 could become $60 overnight. And if they sell, a lot of them will now be watching the recovery.
You see all the chat, they all talk. No one is upset about it, [it's a] slap on the wrist. 'I made a silly mistake there', or 'I'm glad I managed to restrain myself from selling'.No one ever regrets learning that lesson, or just starting, and then just being sensible about it."
Roberts wants the 'Sharesies effect' to be about bringing back share portfolios for regular people and points to the fact that Sharesies investors put around $10m into Auckland Airport's recent capital raise as a sign that it is already helping New Zealand's capital markets.
"People are talking about money. The Sharesies effect is that people are talking about it over the barbeque. You don't look like a massive snob if you talk about investing because you're probably a Sharesies investor.
The funds industry had been "largely pretty positive", particularly at the senior levels, probably because they knew that eventually it would mean more wealthy investors graduating to their services..
"People are aware that this is going to be really good for capital markets in New Zealand, having a retail investor base again, and there's no doubt some of our big clients will become very big, hopefully a lot of wealth will develop.
"People still like personalised advice and some of the bigger established firms will do very well out of that."
Investors are waiting for next week's pivotal interest rate decision.