How To Invest In New Zealand With No Experience!

Key Concepts

• Compounding Returns: The process where investment earnings generate their own earnings over time, leading to exponential growth.
• Active Investing: A strategy involving selecting individual stocks or investments with the aim of outperforming the market.
• Passive Investing: A strategy focused on investing in broad market indexes or diversified Exchange Traded Funds (ETFs) for long-term growth, minimizing active decision-making.
• Exchange Traded Funds (ETFs): Investment funds that hold a basket of securities (like stocks or bonds) and trade on stock exchanges like individual stocks. They offer inherent diversification.
• Brokerage Platform: An online application or website used to buy and sell investments.
• Market Order: An order to buy or sell a security at the best available current price.
• Price-to-Earnings (PE) Ratio: A valuation metric used to compare a company's share price to its earnings per share.
• Dividends: A distribution of a portion of a company's earnings to its shareholders.
• Paper Trading: A simulated trading environment that allows users to practice investing with virtual money.

The Cost of Waiting to Invest

The video emphasizes that delaying investment is detrimental to wealth accumulation. Every day of waiting results in:

• Loss of purchasing power: Money loses value due to inflation.
• Missed market growth: The stock market continues to grow, and investors who are not participating miss out on these gains.
• Slipping compounding returns: The powerful effect of compounding, where earnings generate further earnings, is lost.

A common misconception among New Zealanders (Kiwis) is the belief that significant capital (thousands of dollars) is required to start investing. This often leads to delayed entry, resulting in years of missed potential growth. The video aims to demonstrate how to begin investing with as little as $50.

Investment Strategy: Passive vs. Active Investing

A critical decision for beginners is choosing the right investment strategy. Getting this wrong can lead to stagnant or shrinking capital, while the correct approach can foster significant growth.

Active Investing

• Definition: Involves picking individual stocks or investments with the goal of outperforming the market.
• Challenges for Beginners:
  • Difficulty in beating the market: Even professional fund managers, earning substantial salaries, struggle to consistently outperform market benchmarks.
  • Timing complexity: Accurately predicting entry and exit points is extremely difficult.
  • High risk: For beginners with limited experience and small capital, the risk of selecting the wrong investment, wasting time, or losing money is significantly higher.
  • Time-consuming: Requires extensive research, monitoring financial news, and tracking market movements.
  • Stressful: The constant monitoring and decision-making can be a source of stress.

Passive Investing

• Recommended for Beginners: This approach is presented as the most suitable starting point.
• Methodology: Investing in broad market indexes or diversified ETFs and holding them for the long term.
• Benefits:
  • Removes guesswork: Eliminates the need for constant market analysis and stock picking.
  • Reduces risk: Diversification inherent in ETFs mitigates the impact of individual stock underperformance.
  • Low effort: Requires minimal ongoing research or market monitoring.
  • Low cost: Generally associated with lower fees compared to actively managed funds.
  • Consistent growth: Historically delivers steady returns over time.
  • Accessibility: Can be started with small amounts of money.
• Long-Term Perspective: Passive investing is viewed as a supplement to traditional savings, not a short-term profit-making scheme. Small, consistent investments can accumulate into substantial passive income over time.

Where to Invest: Choosing a Brokerage Platform

Once the investment strategy is decided, selecting the right platform to execute trades is crucial.

Importance of Broker Choice

• Features: Different platforms offer varying features that can aid in making better investment decisions and potentially yield higher returns.
• Access to Stocks: Some platforms provide access to a wider range of investment opportunities.
• Fee Structure: Costs can vary significantly, impacting overall returns.

Mumu Platform (Demonstration Example)

The video uses the Mumu platform to illustrate the process of buying stocks.

• Global Platform: Allows trading of US and international stocks.
• Features:
  • Low fees: US stocks and ETFs from $0.99 USD per trade (plus other pass-through fees and FX costs). AU stocks from AUD $4.99 per trade.
  • Advanced tools: For more serious investors.
  • Simplicity and accessibility: Suitable for complete beginners.
  • Free Morning Star research.
  • AI-powered features: AI Stock Insights for daily moves and AI Announcement Summaries that condense long reports into brief summaries with the original attached.
  • Paper trading option: For practicing without risking real money.

Other Brokerage Options Mentioned

• Sherz's Hatch
• Stake

These platforms, like streaming services, may appear similar but have distinct fee structures, company offerings, and user experiences that require careful consideration.

Step-by-Step: How to Buy Stocks with Mumu

The video provides a practical demonstration of purchasing shares using the Mumu platform.

1. Search for the Company: Enter the name of the company (e.g., Apple) in the search bar.
2. View Stock Listing: Click on the company's stock listing to access detailed information. This includes:
   • Current stock price and recent price changes.
   • PE Ratio (Price-to-Earnings Ratio): A valuation metric.
   • Dividend information.
   • Historical price performance (daily, monthly, yearly).
3. Initiate Purchase: Scroll down and click the "Buy" button.
4. Select Order Type:
   • Market Order: Recommended for beginners. This order executes at the best available current market price.
5. Specify Investment Amount:
   • Number of Shares: Option to specify the exact quantity of shares to buy.
   • Amount to Spend (NZD): Option to enter the total amount of New Zealand Dollars to invest (e.g., $100 NZD). This is presented as a simpler method for beginners.
6. Confirm and Place Order: Enter the desired amount and click the "Buy" button.
7. Order Processing: The order will be processed, and the shares will appear in the account within 1-2 business days.

Important Considerations for Order Execution

• Market Hours: If buying when US stock markets are closed (weekends, holidays), there might be a delay in execution.
• Time Zones: New Zealand's time zone difference from the US can affect the timing of order placement relative to US market opening hours.

Conclusion and Key Takeaways

The core message of the video is that starting to invest, even with small amounts like $50, is crucial for long-term financial growth. The recommended approach for beginners is passive investing through diversified ETFs, utilizing user-friendly brokerage platforms like Mumu. By taking consistent, small steps and focusing on long-term growth, individuals can build wealth over time and avoid the pitfalls of waiting or engaging in complex, high-risk active trading strategies. The video encourages viewers to start their investment journey by leveraging accessible tools and strategies.