New Zealanders face unique financial challenges, from high housing costs to a relatively low wage environment. Finding the right savings app can be a game-changer, but with numerous options vying for your attention, it’s tough to know which ones truly help you grow your wealth. This article cuts through the noise, offering a detailed comparison of popular savings and investment apps in New Zealand, focusing on their features, fees, suitability for different financial goals, and overall impact on your journey to financial security.
Comparing the Players: Key Savings Apps in NZ
Several apps cater to the New Zealand market, each with different strengths and weaknesses. We’ll dive deep into these, but here’s a quick overview of the major players:
- Kernel Wealth
- Sharesies
- InvestNow
- Simplicity
- Hatch
Let’s explore them one by one.
Kernel Wealth: A Long-Term, Low-Fee Approach
Kernel is built for Kiwis looking for a simple, low-cost way to invest in index funds. They offer a range of index tracking funds, covering both New Zealand and international markets. This passive investment strategy is popular for its potential to deliver long-term growth without requiring constant monitoring.
Features:
The main features of Kernel are dollar-based (rather than unit-based) investing in index funds; a limited but carefully chosen selection of funds that covers major markets; and a focus on long-term growth. They now also offer access to managed funds.
Fees:
Kernel distinguishes itself with its low-fee structure. Investing in their index funds typically incurs fees of around 0.25% per annum. According to Kernel’s fee disclaimer, some non-Kernel funds and underlying ETFs will have additional fees and costs. Keep an eye on those additional expense ratios. This is significantly lower than actively managed funds, where fees can easily exceed 1% per annum.
Suitability:
Kernel is ideal for beginner Kiwi investors who appreciate simplicity, low fees, and a long-term investment horizon. Their index funds offer diversification across the market, making them a good choice for building a diversified portfolio automatically. However, it is not suitable for someone wanting access to individual shares or day trading activity.
Case Study: Imagine Sarah invests $500 per month into Kernel’s Total World Fund for 20 years. Assuming an average annual return of 7% (historical averages vary, and past performance is not indicative of future results), her investment could grow significantly, thanks to the power of compounding and the advantage of low fees.
Sharesies: Accessible Investing for Everyone
Sharesies has revolutionized investing in New Zealand by making it accessible to everyone, regardless of their budget. They allow you to buy shares in New Zealand, Australian, and US companies, as well as ETFs. This fractional investing model has opened up the market to a younger generation and those with smaller amounts to invest.
Features:
Fractional shares, auto-invest capabilities, a wide range of investment options (NZX, ASX, and US markets), and a user-friendly interface make Sharesies attractive to beginners and experienced investors alike. Their educational content also helps new investors learn the ropes.
Fees:
Sharesies uses a tiered pricing structure. There is a portfolio limit after which you need to pay a monthly fee, and individual trades incur small transaction fees. These fees can add up, particularly for frequent traders or those with larger portfolios, therefore carefully review Sharesies’ pricing structure before investing.
Suitability:
Sharesies is perfect for beginners who want to start small and learn about the stock market. It’s also suitable for those who want to invest in a diverse range of companies and ETFs without large initial investments. However, active traders should be mindful of the transaction fees, as this may erode profit margins.
Case Study: Mark starts with $50 a week on Sharesies, investing in a mix of NZX-listed companies and US ETFs. Over time, he gradually increases his investment amount and reinvests dividends. The ease of use and low entry barrier encourage him to consistently save and invest, building a solid portfolio over several years.
InvestNow: A Diverse Range of Funds
InvestNow is an online investment platform that offers a wide array of managed funds from different fund managers. This gives investors access to a broad range of investment strategies and asset classes, all in one place.
Features:
Access to numerous fund managers and investment strategies, no minimum investment amounts on many funds, and a regular investment plan option are key features. InvestNow functions as more of a portal to established fund managers than offering shares directly. They also provide various tools and resources to help investors research their options.
Fees:
InvestNow itself doesn’t charge platform fees. However, each individual fund has its own management fees, which can vary significantly. Investors need to carefully compare the fees of different funds before investing. Fund fees are usually reflected in the unit price, so they are indirectly paid by the investor.
Suitability:
InvestNow is suitable for investors who want access to a wide range of managed funds and are comfortable researching and choosing funds that align with their investment goals. It’s also good for those who don’t want to be limited by minimum investment amounts. However, it requires more research and due diligence compared to simpler platforms like Kernel, and not the best for individual stock investing.
Case Study: Lisa is looking for a fund that invests in ethical and sustainable companies. She uses InvestNow to compare several funds with ESG (Environmental, Social, and Governance) mandates, carefully reviewing their investment strategies and fees before deciding on the fund that aligns best with her values.
Simplicity: KiwiSaver and Investment Funds Focused on Value
Simplicity stands out with its non-profit model, offering KiwiSaver and investment funds with a focus on low fees and socially responsible investing. Their philosophy centres around maximizing returns for members by minimizing costs.
Features:
Ethical and socially responsible investment choices, a commitment to transparency, and a focus on long-term growth define Simplicity. They also offer a KiwiSaver scheme, making them a one-stop shop for retirement savings and general investment.
Fees:
Simplicity’s competitive edge lies in its low fees. Its KiwiSaver fund has consistently one of the lowest fees on the market in New Zealand, as quoted in an article published on Stuff. Lower fees directly translate into higher returns for investors over time.
Suitability:
Simplicity is ideal for Kiwis who are looking for a low-fee KiwiSaver scheme with ethical investment options. It’s also a good choice for those who want to consolidate their retirement savings and general investments into a single provider that prioritizes social responsibility.
Case Study: David switches his KiwiSaver to Simplicity attracted by its low fees and ethical investment approach. Over the next 30 years, the lower fees allow his retirement savings to grow significantly more than they would have in a higher-fee scheme, resulting in a more comfortable retirement.
Hatch: Dive Deep into US Markets
Hatch focuses specifically on US stock market investing. It gives New Zealanders direct access to thousands of US-listed companies and ETFs, allowing them to build a portfolio of global brands.
Features:
Access to a vast range of US stocks and ETFs, fractional shares, and real-time market data are key features. Hatch also provides educational resources to help investors understand the US market. However, note that US tax implications can be complex.
Fees:
Hatch charges a fee per trade. While this offers flexibility, frequent trading can lead to higher costs. Investors should be mindful of US withholding taxes on dividends, which further reduce returns. Be aware that Hatch’s fees also include currency conversion fees.
Suitability:
Hatch is best suited for investors who are interested in the US stock market and are comfortable researching and selecting individual stocks. It’s also a good option for those wanting to invest in specific US ETFs. However, beginners should exercise caution and do thorough research before investing, as the US market can be volatile.
Case Study: Elena wants to invest in technology companies like Apple and Google. She uses Hatch to buy fractional shares in these companies, building a portfolio of US tech giants. She closely monitors her investments and adjusts her strategy based on market trends, but is mindful of the currency risk involved.
Beyond the Apps: Maximizing Your Savings Potential
While these apps provide tools to invest, successful wealth building demands a holistic approach. It’s not just about where you invest, but also how you manage your finances overall.
Budgeting and Tracking Expenses
Before you can invest, you need to know where your money is going. Apps like PocketSmith and sorted.org.nz offer budgeting and expense tracking tools tailored for New Zealanders. Analyzing your spending habits helps identify areas where you can cut back and free up more money for savings and investments. Don’t merely track expenses; actively analyze them. Look for patterns, identify recurring unnecessary costs (e.g., subscriptions you rarely use), and set realistic targets for reducing spending in specific categories.
Automating Your Savings
Set up automatic transfers from your checking account to your investment account each month. “Pay yourself first” is a powerful concept. Treat your savings and investments like a non-negotiable bill. Even small, consistent contributions add up significantly over time thanks to the magic of compounding. Schedule these transfers for the day after you get paid. This way, the money goes into your investments before you have a chance to spend it.
Reducing Debt
High-interest debt, such as credit card debt, can significantly hinder your wealth-building efforts. Prioritize paying down this debt before investing aggressively. The interest you save by eliminating debt is often higher than the returns you’d earn on investments, guaranteeing a financial gain. Consider balance transfers to lower-interest credit cards or consolidating debt into a personal loan with a lower interest rate. Focus on the debt with the highest interest rate first (the “avalanche” method) to minimize your interest payments over time.
Understanding Your Risk Tolerance
Your risk tolerance influences the investment choices you make. If you’re risk-averse, you might prefer more conservative investments like bonds or low-risk funds. If you’re comfortable with higher risk, you might consider investing in stocks or growth-oriented funds. Be honest with yourself about your comfort level. Don’t be swayed by hype or fear into making investment decisions that keep you up at night. Remember that risk and potential return are correlated; higher potential returns typically come with higher risks. Consider your age and time horizon. Younger investors with a longer time horizon can generally afford to take on more risk, as they have more time to recover from potential losses.
Diversification
Don’t put all your eggs in one basket. Diversifying your investments across different asset classes (stocks, bonds, real estate, etc.) and different geographic regions can help mitigate risk. A well-diversified portfolio is less vulnerable to market fluctuations and has a higher potential for long-term growth. If you’re using index funds or ETFs, you’re likely already diversified within that specific asset class. However, make sure to consider diversification across different asset classes as well.
Financial Education
Continuously educate yourself about personal finance and investing. Read books, articles, and blogs from reputable sources. Attend seminars and workshops. The more you understand about how money works, the better equipped you’ll be to make informed financial decisions. Sorted.org.nz is a valuable resource for free, unbiased financial information tailored for New Zealanders.
Seeking Professional Advice (When Necessary)
If you’re unsure about any aspect of your financial planning or investing, consider seeking advice from a qualified financial advisor. A good advisor can help you create a personalized financial plan, assess your risk tolerance, and choose investments that are appropriate for your needs and goals. Ensure the advisor is qualified and has a good reputation. Understand how they are compensated (e.g., fees based on assets under management or commissions) to avoid potential conflicts of interest.
Tax Implications
Understanding the tax implications of your investments is crucial. In New Zealand, investment income is generally taxable. Familiarize yourself with the relevant tax rules and regulations, such as PIE (Portfolio Investment Entity) tax rates. Seek advice from a tax professional if needed to optimize your tax strategy. Make sure you have a IRD number.
Staying Disciplined and Patient
Investing is a marathon, not a sprint. It takes time and discipline to build wealth. Don’t get discouraged by short-term market fluctuations. Stick to your long-term investment plan and avoid making impulsive decisions based on emotion. Market volatility is normal. Resist the urge to “time the market” by trying to buy low and sell high. This is notoriously difficult to do consistently and can lead to missed opportunities. Focus on long-term fundamentals and stay invested through market ups and downs.
Comparing Features Table: At a Glance
| App | Investment Options | Fees | Minimum Investment | Pros | Cons | Ideal For |
|---|---|---|---|---|---|---|
| Kernel Wealth | Index funds, Managed Funds | Low (around 0.25% p.a. for index funds) Plus underlying management fee | Typically $1 but varies from funds | Low fees, simple, diversified. | Limited fund selection. | Beginners, long-term investors. |
| Sharesies | NZX, ASX, US stocks & ETFs | Tiered pricing, transaction fees. | None, for fractional shares. | Accessible, wide range of options. | Fees can add up, NZ tax can be complex if multiple holdings. | Beginners, small investments. |
| InvestNow | Managed funds | Fund management fees (no platform fees). | Varies by fund (often none). | Diverse fund selection. | Requires more research. | Experienced investors. |
| Simplicity | KiwiSaver, investment funds | Low. | Varies. | Ethical investing, low fees. | Limited investment options outside KIwiSaver funds. | Ethical investors, KiwiSaver members. |
| Hatch | US stocks & ETFs | Fee per trade, currency conversion fees. | None, for fractional shares. | Access to US market. | US tax implications, currency risk. | US market investors. |
FAQ Section
Q: Which app is best for beginners?
Sharesies and Kernel Wealth are both excellent choices for beginners due to their user-friendly interfaces and low investment minimums. Sharesies offers a wider range of investment options, while Kernel focuses on simple index fund investing with very low fees.
Q: How much money do I need to start investing?
With fractional share investing offered by platforms like Sharesies and Hatch, you can start investing with as little as $5. This makes investing accessible to almost everyone, regardless of their budget.
Q: Are these apps safe?
Generally, yes. These apps are regulated and use security measures to protect your data and investments. However, it’s important to do your own research and understand the risks involved before investing any money. Refer to FMA for more information.
Q: What are the tax implications of investing through these apps in New Zealand?
Investment income in New Zealand is generally taxable. Different investment types (e.g., shares, managed funds) have different tax rules. It’s important to understand the tax implications of your investments and seek advice from a tax professional if needed. PIE (Portfolio Investment Entity) tax rules are particularly relevant for managed funds in New Zealand.
Q: Can I use these apps for KiwiSaver?
Simplicity offers its own KiwiSaver scheme within their app. While other apps don’t directly offer KiwiSaver integration, you can still use them to invest in other investment options alongside your KiwiSaver. Consider consolidating your investments with one provider for simplicity and ease of management.
Q: How do I choose the right app for me?
Consider your investment goals, risk tolerance, budget, and the level of involvement you want to have in managing your investments. Read reviews, compare fees and features, and try out the app’s demo if available. Start small and gradually increase your investment amount as you become more comfortable.
Q: What is dollar-cost averaging, and how can it help me?
Dollar-cost averaging involves investing a fixed amount of money at regular intervals, regardless of the market price. This can help reduce the risk of investing a large lump sum at a market peak. By investing consistently, you buy more shares when prices are low and fewer shares when prices are high, averaging out your cost per share over time.
Q: What are ETFs and Index Funds?
Exchange Traded Funds (ETFs) and Index Funds are types of investment funds that track a specific market index, such as the S&P 500. They offer instant diversification across a broad range of companies within that index. This can be a more convenient and cost-effective way to diversify your portfolio compared to buying individual stocks. They both have management fees which can vary. Most ETFs can be bought and sold throughout a trading day, while index funds are generally only priced once a day once the marked has closed.
Q: Should I use multiple apps at once?
It’s possible to use multiple apps to diversify your investments or take advantage of specific features offered by each platform. However, managing multiple accounts can be more complex. Consider the added administrative burden and whether the benefits outweigh the costs.
References
Sharesies NZ – Sharesies pricing/fees.
Hatch Invest NZ – Hatch pricing.
Sorted.org.nz – Sorted is a free personal finance website run by the Commission for Financial Capability.
Stuff NZ – KiwiSaver fees: The lowest-cost schemes for every age bracket.
The information provided in this article is for general informational purposes only and does not constitute financial advice. You should consult with a qualified financial advisor before making any investment decisions.
Ready to take control of your financial future? Don’t wait any longer. Download one of these apps today, start small, and begin your journey to financial freedom. Even small, consistent steps can lead to significant long-term rewards. The best time to start investing was yesterday. The next best time is now!
