Even if you're a good saver, you need to be thinking about investments if you want to make it to retirement. And yes, you need to be thinking about them even if you're in your 20s like me.
But it can be overwhelming to start with, especially if you didn't grow up in a family that talked about finances.
NZX head of funds management Aaron Jenkins said there were three main fund types new investors would come across.
"Managed funds, as the name suggests, are where somebody's managing that fund portfolio for you.
"Because of that extra research and analysis ... they typically therefore come with higher fees.
"An index fund, unlike a managed fund, is where there's no research done. The index fund just invests on a set of rules.
"An example in New Zealand is the New Zealand Dividend Fund. That's just a set of rules that says that fund will invest in the 25 highest-dividend-paying companies in New Zealand over the last year.
"The third one you asked about is exchange traded funds, or ETFs, as you'll hear them shortened. They could be a managed fund or an index fund, it's just that they are listed on the stock exchange.
"Now typically when you hear ETFs described, people are thinking of them as index funds. The benefit of ETFs is that they are quoted on the NZX, so you can see the price of them every day, and you can buy or sell them exactly the same way as you would buy shares in a listed company."
He said shares were best for those who were thinking about their money over the long haul.
"Over the long term shares will typically have a better return than other investment options, for example a term deposit.
"But the downside is that shares are likely to be more volatile.
"So the benefit a fund provides is helping with diversification. Rather than an investor having to buy shares themselves in multiple companies, a fund does that for you, which immediately helps provide an element of risk management for an investor."
Jenkins pointed out that a fund of any type had the benefit that, if your circumstances changed and you needed some of the money back, you only had to sell some of your shares.
It was easier than something like property, where you'd have to sell the entire house.
For those who wanted an idea of what sort of return they could expect on their money, Jenkins pointed to the New Zealand Top 50 fund.
It launched in 2004, and has since had an average return of 7.5 per cent per year, after fees and taxes were taken out.
The false security of KiwiSaver
Commission for Financial Capability personal finance editor Tom Hartmann
If your KiwiSaver is in a default scheme you're throwing money away. You're going without, saving some money each pay day, but could still be in hard times when you finally retire.
And yet, for the sake of a few clicks at your computer, you could have made the exact same savings and had a cushy retirement.
It's extremely worrying that 445,000 people are in default KiwiSaver accounts.
The default schemes were never supposed to be permanent. They're conservative, meaning your money is safe as houses, but you will also likely get very little return.
If you're in your 20s, you're possibly throwing away hundreds of thousands of dollars.
To prove the point, I got in touch with Commission for Financial Capability personal finance editor Tom Hartmann. He ran the numbers on me, a 29-year-old earning a fairly average salary.
If I made the minimum payments into my KiwiSaver, a best case scenario for a conservative fund was around $285,000 when I retired. But in a growth fund that leapt by $200,000, to a total of $485,000 when I retired.
Those are no small potatoes.
Hartmann said picking the right KiwiSaver fund could be the difference between scrimping in your retirement, and enjoying it.
Sorted's Fund Finder makes it embarrassingly easy to sort this out. It asks you a couple of questions, ranks your options, and should have you pointed in the right direction within minutes. Just Google it, it will pop right up.
Hartmann said they'd cut the Fund Finder back to the simplest necessities to make it easier for people to use.
"There are three quick questions on what kind of fund would be appropriate for your situation. Then you can sort by important things such as fee levels, the services that come with the KiwiSaver fund, and have a look at how the fund has been doing up until now."
The most important thing is that you make an active decision about your KiwiSaver fund. If you're about to buy a house, or are retiring soon, then a conservative fund might actually be a good idea.
But if you've got decades to retirement, or even several years, you should check whether a growth fund is a better idea for you.
Hartmann said the single biggest difference you can make for your future is actively picking a conservative, growth, or aggressive fund. It outweighs all the other factors.
For those who want even more information, since this episode played, the FMA has also released a helpful tool.
Its KiwiSaver Tracker weighs up fees, risk, and the return you're likely to get with those factors taken into account. If you Google "FMA KiwiSaver Tracker", it pops right up.
Becoming an investor for $5
Brooke Anderson and Sonya Williams, two of Sharesies' founders
I'm personally a huge fan of the share market, particularly for young people.
It's riskier, but that's a good thing when you've got lots of time, as you can ride the waves to a bigger eventual return.
But even if you know all of this, investing when you're young isn't so easy.
When you're young is also when you're broke. You're still low on the job ladder, trying to pay off student loans, maybe save up a house deposit, and hey, having a life would be nice as well.
So the founders of Sharesies came up with a plan to let people invest for as little as $5.
The platform works on the idea of investing a little bit, often. They give you access to index funds and let you track how you're going.
One of the founders, Brooke Anderson, said they knew there was a gap where some people needed easier access to investing.
"With home ownership becoming more and more unobtainable, we needed to help with an alternative way for people to grow their wealth.
"It costs $30 annually to sign up to Sharesies, and that allows you to buy and sell as much as you like.
"For each of the investments on our platform, the minimum is $5."
Co-founder Sonya Williams said they did six months of customer validation before launch to make sure they got it right.
"What we found is that there was a stigma around investing and the types of people who invest.
"There was the perception that it wasn't for the majority, it wasn't for most people.
"But there was an aspiration. Once you talk to people about being an investor, everyone wanted to be an investor.
"So the barriers were that people didn't know how to get started, they wouldn't even know where to look, and they were priced out because the minimum buy-ins were too high."
Since this episode aired Sharesies has continued going from strength to strength. In November they hit over 8400 customers, with $5 million invested through their app.
What to do when the bubble bursts
Craigs Investment Partners head of private wealth research Mark Lister
It's the age old advice: shares are a great investment for building up personal wealth, as long as you can stomach the risk.
Over 10 years, you're likely to get a sizeable return. But within that decade, be prepared to grit your teeth through some years where your money goes backwards.
Craigs Investment Partners head of private wealth research Mark Lister said any investor, whether professional or just starting out, needed to be prepared for just those situations.
"Over the short term, markets are completely unpredictable.
"No one has a crystal ball that works perfectly. If anyone tells you they do or thinks they do, that's probably the first sign to run a mile."
Luckily, Lister said the secret to success wasn't about trying to game the market in that way.
He said playing the long game, and making sure your investments were spread across different industries, was the way to insulate yourself from shocks.
"You know, you look at the New Zealand sharemarket, this year it's up 10 per cent year to date. Fletcher Building's down 30 per cent." [As of when the podcast was released, on 26 July.]
"So the lesson is, whenever you're investing in shares, you've got to make sure you've got a portfolio of companies.
"You don't want to own just one, or two, or five.
"You want to own 10 or 15. You want to have a good spread of exposures to different industries, not just the building and construction industry, you want to have some healthcare, some utilities, some infrastructure, some tech.
"Ideally you want to have some shares in other parts of the world too."
If you'd already bought some shares and their value took a dive, Lister said it was important not to panic.
"You want to ask yourself questions about 'why did I buy this in the first place', 'has the story or the investment case changed', and 'would I still buy it today if I didn't already own it'."
But for those who hoped a market crash might mean bargains to be had, Lister had further words of caution.
"You don't know whether they're going to keep going down further or whether you've hit the bottom.
"So I don't think you want to get into the trap of trying to bet the farm on things at this very specific point in time.
"A good way to do it is just that installment investing. Steady investment, every week, every month, every quarter, whatever.
"When you take the guesswork out of it, you end up picking up some bargains.
"The more we overthink things and try to pick where markets are going, the more we run the risk of making bad decisions."
