This article was published on 6 May 2017. Some information may be out of date.


  • Index fund comparison inaccurate — and look how shares have grown!
  • Broke couple could share their house…
  • …or live on a boat
  • Beneficiaries entitled too
  • Paying for your rest home? Lucky you
  • Services for Seniors booklet tells all

QIf Smartshares are supposed to be index tracking, why has, in particular, their NZ Top 50 tracking fund, FNZ, performed significantly worse than the index?

For example, since January 2014, according to Google, NZ50G has gone up 50 per cent, but the tracking fund only 30 per cent. Surely this can’t all be on account of fees?

AYou’re comparing kiwifruit with feijoas — to give apples and oranges a rest. And, while we’re at it, did you notice how big the fruit salad has grown?

For the benefit of others, Smartshares’ share index funds — including the NZ Top 50 Fund, or FNZ — invest in the shares in market indexes.

Each fund is therefore expected to “track” — or perform pretty much the same as — their index, with a bit of slippage because of fees.

There are two key problems with our correspondent’s comparison:

  • Indexes. The NZ Top 50 Fund tracks the NZX 50 Portfolio Index. This differs from the NZX 50 Index that you looked at, because the portfolio index has a 5 per cent cap on any one share.

Sometimes a share will creep up above that cap for a while, but that will be corrected when the index is rebalanced, once every three months.

The 5 per cent cap can make quite a difference to performance. When shares in New Zealand’s biggest listed companies do particularly well, the ordinary index will rise faster than the portfolio index. When the big boys don’t so as well as the smaller companies, the portfolio index will rise faster.

By the way, I think it’s better to invest in a fund that follows the portfolio index. This avoids letting the sharemarket giants dominate.

  • Dividends. You compared a gross index, which includes reinvested dividends, with data on the performance of the fund without dividends.

The fund does, in fact, reinvest dividends received. But Smartshares also publishes the data without dividends so people can compare the fund’s performance with the index without dividends. This gives the cleanest picture of how well the fund is tracking.

And data on the Smartshares NZ Top 50 Fund page, at, tells us that in that comparison, the index and fund are neck and neck. The fund has grown 11.67 per cent a year over the last five years, while the index has grown 11.69 per cent.

That page also shows us that if we include dividends, and subtract fees and tax — to get the actual return made my investors — the fund has grown 15.59 per cent a year over five years. That’s impressive. An investment in the fund would have more than doubled over that period.

For comparison, over the same period, QV data show that New Zealand house prices have grown at 9.4 per cent a year, while Auckland house prices have grown 13.4 per cent a year.

But I’ve always said five years is too short a period to judge such investments. Let’s look at the data from December 2004, when the Top 50 Fund started:

  • The NZ Top 50 Fund grew 7.45 per cent a year.
  • NZ house prices grew 6.3 per cent a year.
  • Auckland house prices grew 7.7 per cent a year.

Of course, this is another tricky comparison. We’ve included dividends in the share fund’s growth, so we should include rental income in house price growth. But then we need to subtract all the costs of property investment — rates, insurance, maintenance, allowance for periods with no tenants, and so on. How do we estimate all those, which vary so much from property to property?

Then there’s the even trickier issue of gearing. People nearly always borrow to invest in property, but rarely to invest in shares. If you gear, you get faster growth on the money you have invested, but you also have to pay interest. How much gearing should we assume?

It’s all too difficult. Suffice to say that while Aucklanders, in particular, have been absorbed in house price growth over recent years, NZ shares have also performed really well. Many people have gained from this — whether or not they realized it — in the growth of their KiwiSaver balances.

I should add that, just as there’s a worry that house prices might fall, the same can be said for shares. In any market that has such a good run, a “correction” or at least a slowdown is inevitable. We just don’t know when.

P.S. For our correspondent and others who want to do research, NZX, which runs Smartshares, adds, “When using Google Finance you will need to use the following codes:

“NZE:NC50C — S&P/NZX 50 Portfolio Index (Capital Index) — this index assumes dividends are not reinvested.

“NZE:NC50G — S&P/NZX 50 Portfolio Index Gross (Gross Index) — this index assumes dividends are reinvested.”

QLooking at alternatives for the couple 67 and 60 who are broke, an opportunity to reduce their rental is to house share with another. Many “oldies” live in a house too big by half for their own use.

Obviously, compatibility would be high on the list, along with the sharing of electricity, water and rates. This has a lot to commend it, the rental being reduced by at least half.

AA good thought if the couple’s house is reasonably big. They could take in a flatmate or boarder — possibly a foreign student.

QHearing about the folk who lost their money in later life made me think about the series you ran about people living on boats.

I participated, and several people contacted me on the subject afterwards. Some went on to chase that dream. Most who do so in New Zealand are the age of the couple in your column — with a sprinkling of grey hair.

With no capital at all, renting a house may be the only option, but with some money a life afloat with the facilities of a city marina becomes possible. As an alternative to a marina berth, living on a swing mooring presents access and safety issues, but is even cheaper.

It is now possible to live afloat for as little as $50,000 upfront, and for annual expenses on a marina with insurance and minimal maintenance for as little as $8,000 per year. There are still Auckland city marinas with spaces and berths to buy or rent.

If it is glamorous enough to have the lifestyle of living on English houseboats featured on TV recently, we can surely beat that with Auckland’s warmer climate, with the rapid ferries to the city and the many attractions of the Hauraki Gulf on our doorstep.

BTW, I have recently sold my boat to live-aboards who decided to trade up to something larger. In the process some boats and berths (the two essential ingredients) became known to me. So if you have anyone who wants to explore this idea further, I would be happy to give them a pointer. But at the end of the day, they need to get their own boat survey and do their own homework.

AA different idea for adventurous people. And thanks for again offering to help interested readers — as you did early last year.

Anyone who wants to take up your offer should email me and I will forward the email to you.

QYour final correspondent in last week’s column is correct in describing NZ Super as an entitlement. However, what they seem to fail to understand is that under New Zealand legislation the core benefits (Jobseeker Support, Sole Parent Support and Supported Living Allowance) are also entitlements.

Just like Super, if you fit the criteria — and they are stringent — you are entitled to the financial support.

The tone of the correspondent’s last sentence implies any contribution to society can only be financial. Two of my role models were a couple with cerebral palsy. They simply ignored the prejudice and ridicule of others — which was considerable — lived a full life joining and participating in service organisations, and were always ready to help others when they saw a need.

In their time they also managed to buy a piece of land, build a house and eventually make it mortgage-free. They inspired me. Their contribution to society was one which simply cannot be measured by any monetary value.

AThanks for a thought-provoking letter.

QThere is another way of looking at having to pay for rest home care. Be thankful that you have been able to accrue significant assets in your life.

When you enter a rest home, don’t stress if your savings are used to pay for your care. You are reducing the tax burden on the country. You are providing employment for the people you will be depending on for the next few years. You don’t know how lucky you have been.

When I retired I had 300 days of accrued sick leave. When I was working, it was great knowing that if I had needed it, it was available. Fortunately I didn’t have to use it and it was forfeited on retirement. My wife had a terminal illness and we were grateful to be able to use her 120 days when she needed to stop working.

Be thankful for what you have, but you can’t take it with you.

AGreat attitude. Those who don’t need government subsidies or sick leave are indeed the lucky ones.

Looking at the bigger picture, my aim is to die having paid more in taxes than I’ve got back in government spending. That will mean I’ve had a relatively easy life.

QThere is a very comprehensive publication free from WINZ, I think, that all retirees should obtain. This publication deals with all the areas we need to know about — wills, trusts, power of attorney, rest home subsidies, the forms and questions that have to be answered, prepaid funerals etc.

Maybe you can find out the name of that publication and publish it? It’s a must for all retirees!

AThanks for this. I think you’re talking about the Services for Seniors booklet, which has just been updated with the NZ Super rates that took effect from 1 April.

There are all sorts of ways you can get a copy.

“Hard copies are available from Work and Income service centres and Citizens Advice Bureaux. They’re also given out at seniors expos and community talks etc. We provide these on request to groups, for example Grey Power,” says the Ministry of Social Development.

“They are often handed out with application forms for NZ Super from service centres, although we also encourage clients to apply online. If a client asks for an application form to be sent to them, a copy of the brochure is usually also sent.

“People can request a copy of the brochure using the form/brochure request web form (available on this page: under the heading “Do it online”), over the phone, or by email to [email protected].”

Or you can download it at

The Ministry adds, “The Office for Seniors hosts other information regarding legal protections on our website

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Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding 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.