QI have a lump sum of around $50,000 that I’m keen to invest in the share market.

I have several bank term deposits already to mitigate risk in this present volatile equity market. But I’m wondering what your thoughts are on putting the $50,000 into an account that drip feeds into shares, say a good ETF fund, thereby capitalizing on low share prices when they are down, or putting the entire amount into a share fund all at once.

AAs I’ve often said, it’s really good to drip feed into an investment over time — which is what happens for most people with KiwiSaver accounts. Drip feeding gives you a good deal.

Let’s look at a simplified example, in which you invest $100 a month into KiwiSaver:

  • When the markets are performing well, the value of the units in your fund may be $20, so your $100 buys you 5 units.
  • When the markets are down — as is the case currently — the unit value may be $10, so your $100 buys you 10 units.

The average market price over those two periods is $15 — halfway between $20 and $10.

But you bought a total of 15 units for $200, so your average price is $200 divided by 15, which comes to $13.33.

How come you paid a below-average price? Because you bought more units when they were cheaper, and fewer at high prices.

We do this consciously with, say, peaches — buying more when they are cheaper. With drip feeding into an investment it happens automatically. Great!

However, you’re in a different position. You’ve got the money there to invest all at once.

With a lump sum, theoretically the best idea is to invest it all now. On average the returns you’ll get in the fund will be higher than in the bank account, or wherever the money is sitting waiting.

But I recommend splitting your $50,000 into, say, three equal lots, and investing some now, some in one month and the rest in two months, because of two psychological factors:

  • Choosing a date. If you are investing it all at once, you will be inclined to keep putting off making the investment, in case the market drops further tomorrow. Meanwhile, the money is probably earning a lower return. And you run the risk that you’ll miss out on a sudden market recovery.
  • Avoiding post-investment blues. After you have invested, you don’t want to be really unhappy if you see that the market dropped soon after you put in the whole $50,000. If you do it in three lots, at least some of the money won’t be invested at what turns out to be the worst time.

But don’t get carried away with spreading the deposits over too long a period. Get that money in there.

QI’m early 60s and have stopped working after the company I worked for was liquidated. My wife works and is early 50s. I have a house, holiday home and $1.5 million invested, so very fortunate.

We thought we’d travel, so applied for a platinum credit card for its travel insurance perks. Was quickly rejected as I wasn’t earning anything, so thought I’d up my limit on my boring old Visa card I’ve had for 40 years, from $6000 to $10,000. But ASB Visa said no to that too.

I was advised that due to law changes, you have to be earning, and investments can’t be taken into account, which seems really dumb.

So my advice is if you are nearing retirement, make sure you get a credit card while you are working.

AYour advice is probably good, although other retired people wanting a credit card shouldn’t give up.

“ASB does not decline applications for new or increased credit card spend simply because a customer is retired,” says a spokeswoman. “As a responsible lender, our lending decisions take a range of factors into account, including reliability of income and the ability to meet repayments over the long term.”

She adds that under Credit Contracts and Consumer Finance Act (CCCFA) requirements, “there have been cases where it’s been more challenging for customers to get credit.

“This is because the information we must consider when assessing repayment ability might show the customer cannot easily manage the repayments, even though other factors mean they would be unlikely to fall into hardship. ASB has been working with Government to help iron out some of these issues.”

Nevertheless, the bank obviously thought your situation seemed odd, and asked me to put you in touch with them.

The result? An email from you saying, “ASB were falling over themselves to help, thanks to you. I now have a Platinum Visa card, free travel insurance to boot. Many thanks.”

I’m glad it turned out well.

QMy take on last week’s 11-year-old with the $35,000 inheritance would be: Split it seven ways and directly buy shares.

Purchase brokerage if online is very minimal, and no ongoing fees. Try from Auckland International Airport, Mainfreight, Ebos, Fisher & Paykel Healthcare, Freightways, Infratil, Port of Tauranga, Skellerup, an energy company, a retirement operator and as an outlier Turners.

Compound the dividends where you can, and use imputation credits to pay any tax. Might be able to get a special or zero tax code as an 11-year-old. Do everything online where you can, but get paper copies of annual reports.

A fund investment is somewhat meaningless. By investing directly you have a vested interest in that business, can follow them in the media and, as you turn 12, 13, 14 etc you will have a greater understanding of these businesses and the whole share market.

I’ve done this for 21 years. My compounded growth yield per year is 13.25 per cent, but taking the dividends, dividend yield just under 6 per cent.

AAn interesting suggestion, thanks — assuming the boy’s parents or another relative or friend is happy to help him set it up.

I suggested last week that he invest in a high-risk, low-fee KiwiSaver or other managed fund, which would hold mainly shares. Research shows that the average individual investor doesn’t do as well as someone who invests in a share fund, despite the fees. And it’s easier.

But he might get lucky — as you have. Your 13.25 per cent a year is better than the NZX50’s compounded before-tax return for the last 21 years of 10.3 or 11.2 per cent a year, depending on how you measure it.

And he would certainly learn more about shares and the share market.

Incidentally, I like the wide range of industries you suggest he invests in. That’s much wiser than concentrating on a few industries, which might do really well but then crumble.

QI have read about the choice given to the person in last week’s column who wants to give up his job at 50 to study for another career.

My sister had seven children (good Catholic girl) and was put on the spot when her husband was made redundant. He was obviously the only source of income for the house. He was not in good health so another job was not really on the cards for him.

She immediately went into full-time study for a nursing degree, and after four years of hard graft (and no real income for the family apart from a student allowance) graduated and got a job as a junior nurse.

Twenty years later she retired as a senior theatre nurse — the one in charge of the other nurses in the operating theatre. Sure, it was tough but it all paid off in the long run!

AA great story. I can only admire your sister and her family for making it work.

By the way, the correspondent last week was a woman, not a man. It’s funny how often readers make wrong gender assumptions!

QYour November 12 correspondent who enquired about purchasing a rental property through a “company that specialises” in property investment may benefit from calculating the net yield and return on investment (ROI) to determine if an investment is worthwhile. Don’t include a speculative number for capital gains like almost all of these companies do.

If the property you’re buying doesn’t make money from rent alone, don’t buy it. It will be much more difficult to find an investment property, but it is possible. How will the ROI compare to the S&P500 average?

Investing for yield mitigates risk, amplifies returns and cuts through the marketing and speculation of these companies.

Note these companies are sales organisations earning commission from the developers they sell the property for, not investment mentors focussed on helping you out. They’re not economists, and those future capital gains they forecast — being grand enough to make up for your very real annual losses — may be rather elusive.

ASounds as if you’ve been there — and learnt from it.

I agree that it would be unwise to count on making a gain on selling a rental property to make the investment work — especially over a relatively short period. The very fact that there have been large house price increases in recent years makes it less, rather than more, likely such big gains will continue after the current slump.

I suggest anyone planning a rental property investment talks it through with their own accountant or adviser, not someone connected to property sellers.

Meaningful Christmas Gifts

Many charities offer Christmas gift programmes. You buy items for people in need that are given on behalf of your family or friends. For example, you might donate money for school equipment in developing countries. You receive an acknowledgement to give to your relative or friend to show what they have “donated”.

It makes a great Christmas gift — more meaningful than buying stuff for one another that is often not wanted.

Each year, this column runs a list of charities that take part in these programmes. I’ve asked each one to describe their programme in 20 words or less:

  • Caritas Aotearoa New Zealand: 0800 22 10 22. “Caritas Gifts of hope, life, peace, or learning enable our life-changing work in Aotearoa New Zealand, and around the world.”
  • ChildFund New Zealand: 0800 808 822. “Give ChildFund Gift Cards this Christmas. Less stress for you, more choice for your loved ones in helping children.”
  • Christian World Service: 0800 74 73 72. “Gifts of joy that bring change around the world. Water, Food, Schooling.”
  • Leprosy Mission New Zealand: 0800 862 873. “Share God’s love with people facing leprosy this Christmas; for as little as $10 for a pair of protective sandals.”
  • MEND NZ — Mobility Equipment for Needs of the Disabled: 021 060 9631. “Give African or Himalayan youth a limb to walk to school or hearing aid to hear for the first time.”
  • Oxfam Aotearoa: 0800 600 700. “Give a gift with a purpose — every Unwrapped card helps remove the barriers that keep people in poverty.”
  • Save the Children New Zealand: 0800 167 168. “Give the gift of a bright future! From clean water to a school library, your Good Gift helps kids thrive.”
  • Tearfund: 0800 800 777 . “Give essential supplies to Ukrainian refugees ($20), or a hen ($20) or a goat ($55) or help trafficking survivors ($35)”
  • The Fred Hollows Foundation NZ: 0800 227 229 . “Give unique handmade gifts to friends and family while helping restore sight to someone in the Pacific.”
  • The Salvation Army: “Give a gift that tackles poverty and injustice in the Pacific and around the world.”
  • World Vision New Zealand: 0800 800 776. “From chickens to fast-growing seeds, you can help change a life this Christmas with a World Vision Smiles gift.”

No paywalls or ads — just generous people like you. All Kiwis deserve accurate, unbiased financial guidance. So let’s keep it free. Can you help? Every bit makes a difference.

Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.