Where should you invest your money? How can you make money online? You’ve tried to look at other blogs but they never answer what you’re looking for. Well, I found the solution.
Now, I’m not promising you this will be easy. But it will be well worth your time if you are looking for a way to work from home and have financial freedom. The following are safe investments with high returns. They are NOT get-rich-quick schemes or scams.
Shares
What are they?
- When you buy a share, you buy a piece of a company – the more you buy, the more of the company you own. Investors buy shares believing the price will go up in time and/or that the dividend (cash return on the share) is attractive.
- Shares are a popular asset to invest in but picking the right company is not without its risks. The NZX (New Zealand’s sharemarket) has many success stories such as Xero and A2 Milk. It also a number of high-profile failures such as CBL Insurance and Snakk Media which have evaporated investors’ money.
Difficulty to invest and manage: Medium to Hard
Risk: Low to High (depending on what companies you invest in). The price of a share can go up and down every day meaning your investment may fall in value, but you don’t make (or lose) any actual money until you sell your shares.
Potential return: Negative to High
Pros & Cons
- Pros: A lot of potential profits if you choose the right shares, but this is harder than it appears. For example, Fisher & Paykel Healthcare has risen from $1 to over $30, Xero from $1 to over $140 and A2 Milk from 25 cents to over $20. However, many companies have gone the opposite way. Burger Fuel ($3.50 to 40 cents), Moa Beer ($1 to 12 cents) and Sky TV ($6 to 14 cents) are just some examples.
- Cons: Risky – if you choose a company that underperforms, you will see a drop in your original investment.
How to start investing in shares: Our guide to investing in shares explains more. If you’re unsure what to invest in, it’s worth considering an index fund that focuses on shares. Examples of such funds include the Vanguard S&P 500 fund (via Hatch) or the NZ Share Fund (from Simplicity Investment Funds). Trading platforms Direct Broking and ASB Securities are two major platforms popular for low-fee share buying and selling.
Related guides: Investing in Shares, Sharesies Review, Hatch Review, Direct Broking Review and ASB Securities Review
Want to compare Sharesies with InvestNow, Hatch and other platforms? Read our Comparing Sharesies vs Investnow vs Hatch and more guide.
Don’t be a sheep
If something’s much talked about, it will have been priced into shares and you could overpay. See: new tech unicorns such as Peloton, which fell ten per cent on its second day of trading.
Ethical investing is not only good but lucrative
You don’t have to sacrifice returns to protect your principles. Some ethical funds have produced greater returns than their traditional equivalents. For example, the Rathbone Ethical Bond Fund delivered 10.2 per cent this year compared with 5.1 per cent for its Strategic Bond Fund.
Property
What is it?
- Buying houses is a longstanding New Zealand favourite investment option. The process is simple; you buy a property with two goals in mind – renting it to pay the mortgage and/or provide an income whille anticipating an increase of value over the time you own it. When you decide you want your money back, you advertise the property for sale, sell it and get paid the proceeds.
- Most investor mortgages now require 35% or 40% of the price of the house upfront (but not always), while some investors also go for ‘interest-only’ loans. The rates of returns differ depending on the property type and location. For example, a house in Auckland is likely to rise in value faster than a flat in Greymouth or a lifestyle block in Kaitaia.
- The 2020 Covid-19 events demonstrated not even property is a ‘safe’ investment. The resulting economic conditions severely affected property values in key tourism areas. A lot of pressure was put on property investors as AirBnB bookings evaporated overnight, and the overall tourism industry struggled with job losses leading to less demand for rentals.
Difficulty level for investing and management: Easy to Hard, depending on the property you purchase and how you rent it out.
Risk: Low to High (depending on what property you invest in). While house prices generally go up, property is a long-term investment as in the short-term they can fall significantly. The 2008 Global Financial Crisis and 2020 Covid-19 are examples of this.
Potential return: Negative to Medium
Pros and Cons
- Pros: Property is, generally, an asset you can see and understand (compared to shares in a company or a crowd-funding investment). You have full ownership over a residential property investment and the right to do whatever you want with it (rent it, renovate it or live in it). Up until 2020, New Zealand’s house prices increased to record highs thus suggesting property was a good investment, but past performance is no guarantee of future returns.
- Cons: If you have problem tenants, you may not be paid rent which can cause financial stress if you need to pay a mortgage. Also, repairs and maintenance can be costly and unexpected – $5,000 for new drainage, $40,000 for a new roof etc means you’ll need to continue to spend money to ensure the property is rentable.
How to start investing in property:Interest.co.nz has useful insights into housing market conditions. You’ll need to have a deposit saved and be prepared to spend 8% to 15% of rental income on a property manager if you don’t want to deal with tenants.
Related guides: Investment Property Mortgages, First Home Buyer Guide and Landlord Insurance
Picking stocks? Only buy what you understand
Laura Suter of AJ Bell suggests, for example, that if you’re a regular at the gym, look at brands or supplement companies; if you like motorbikes, look at parts suppliers and manufacturers. “When you examine the company’s financials and prospects you’ll understand the market and the lingo.”
Turn up your BS detector
Sounds too good to be true? You’re probably being scammed.
Bonds
What are they?
- Bonds are an investment which sees you lend your money to a company or government for a fixed period. You’ll be paid interest just like you would be if you leave money in the bank, but the interest rate tends to be higher given there is more risk.
- The riskier the company you invest in, the higher the yield (i.e. return on investment). For example, a bond in Air New Zealand is riskier (and therefore pays a higher interest rate) than a bond in Contact Energy. This is due to Contact’s relatively stable industry (electricity production) vs the aviation industry. Many KiwiSaver schemes invest in bonds as part of their fixed-interest asset allocation.
Difficulty to invest and manage: Medium to Hard (if you buy and sell bonds directly)
Risk: Low to High (depending on the bond you invest in)
Potential return: Low to Medium
Pros & Cons
- Pros: Relatively safe if you pick the right bond – the New Zealand government, for example, is safer than investing in government bonds from Argentina or Lebanon which have a history of defaulting (i.e. not repaying their investors). Also, the interest rate can be significantly higher than bank deposits.
- Cons: Risky – if you choose a company that goes bankrupt, you’ll likely lose all of your investment.
How to start investing in bonds: interest.co.nz’s bond guide explains more, and their bonds data covers what’s available right now. If you’re unsure what to invest in, many conservative funds invest in bonds as part of their investment strategy. An example is the NZ Bond Fund from Simplicity Investment Funds. Trading platforms Direct Broking and ASB Securities both offer bond investment opportunities.
Related guides: Simplicity Investment Funds, Direct Broking Review and ASB Securities Review.
Beware the mini-bond
Bonds might be considered safer than equities, but avoid hyped niche products offering stellar returns. Mini-bonds have been in the spotlight after the collapse of London Capital & Finance, which owes £237m to 11,600 investors.
Don’t invest for the sake of it
The whole point of making money is to fund the kind of life you want to lead. So how much money do you need to do that and when do you need it by? Invest to meet your life goals, rather than taking on risk for the sake of it.
Conclusion
Where to invest your money…this is one of the most common questions people have. It is also one of the most dangerous questions you can ask. It’s easy to set out on a path of investing your hard earned cash into something, anything, just so you can say that you are investing it. But, just because something looks good on paper, that doesn’t mean it is a good investment for YOU! Your best bet is to invest your time first. Cheers!