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First-time Investors' Guide

There are lots of options to consider when you're investing for the first time. This Investors' Guide can make it an easier experience when you're looking to break into the market.

5 minute read

It can seem like everyone has their preferences, strategies, and opinions when it comes to investing. As a first-time investor, how do you know who to listen to and what’s going to work for you? It can be daunting at first, but after taking the first step, most people find it much easier and a lot less scary than they expected. 

Know your profile

There are a few things to figure out before you start, like what type of investor you are. Your investment timeframe will be influenced by your age, investment goals, what you are saving towards, and the risks you’re willing to take. Completing a quick test like this one from www.sorted.org.nz will help simplify the process.

Once you’ve identified your investor type, you’ll be able to research and compare your investment options.

Diversify your investments

Spreading your money out across multiple types of investments is the simplest way to manage your risk and should help to smooth out the ups and downs as the values of investments fluctuate – this is called diversification. Knowing what your investor profile is can help you work out the right mix of investments to put your money in.

Know your options

Generally, your investment style and profile will dictate how you invest and what you prioritise. KiwiSaver schemes, other managed funds or Exchange Traded Funds are cost-effective ways to invest in a diversified range of assets. Here’s a little more info on some investment options that might be right for you:

• Managed funds
  Buying into managed funds is a straightforward way to ‘diversify’ your investments. They’re financial products that invest your money in shares and other investments like property, term deposits, and cash – KiwiSaver Schemes are a common example of a type of managed fund. People use KiwiSaver to save for retirement or their first home.
  
  
• Exchange Traded Funds (ETFs)
  These funds bundle assets together so that by buying one product you can get exposure to a range of investments such as shares and bonds. ETFs are traded on the share market so can be bought and sold in the same way as individual shares. 

Investors can also choose to invest directly into the following assets:

• Shares
  Investing in and buying shares means you’re buying part of a company. If the company does well, so do your shares, and you may be paid a share of the profit called a ‘dividend’. Share prices rise and fall over time, so the key is to sell when the time’s right to make ‘capital gain’. 
  
  
• Bonds
  Also known as ‘fixed interest investments’, you can think of bonds as an IOU issued by a Government, council or company. We lend them money for a number of years, on the terms they pay a certain interest rate called a ‘coupon’. The risk involved depends on whoever’s issuing them.
  
  
• Cash
  Being short-term obligations, cash investments are seen as a ‘safer’ option as they’re lower risk and provide a stable (but lower) return comparatively in the form of interest payments.

Getting help

Some investors are confident doing it on their own. However, first-timers, or those who want to seek expert help, may benefit from speaking to a financial adviser. Depending on the type of financial product you are interested in, a financial adviser will be able to help you with advice. The purpose of financial advice is make recommendations about financial products based on a customer's needs and suitability.

Having a professional onboard doesn’t just help when deciding where to put your money – if you need it, they may also be able to identify problems when something’s gone wrong and help get you back on track.

Monitoring your investments

It’s simple to keep track of how your investments are sitting. Normally, your financial provider will send you regular updates on how your investments are tracking. Or you may have to access reporting information yourself.

It’s also just as important to continually review your investment goals to make sure they’re reflecting what’s going on in your life. If something big like a property purchase is approaching, you might want to consider investing in something more stable to avoid being left short when you need it most. 

When you don’t have a lot of experience or money to play with, committing to your first investment can be a stressful move. If you make sure you set goals, figure out your investment style, and start small, you’ll take a bit of pressure off and help to set yourself up for success in the future.

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This article is solely for information purposes and is not financial or other professional advice. For help, please contact BNZ or your professional adviser. No party, including BNZ, is liable for direct or indirect loss or damage resulting from the content of this article. Any opinions in this article are not necessarily shared by BNZ or anyone else.

BNZ Investment Services Limited, a wholly owned subsidiary of Bank of New Zealand ('BNZ'), is the issuer and manager of the BNZ KiwiSaver Scheme and YouWealth. Copies of the BNZ KiwiSaver Scheme Product Disclosure Statement and the YouWealth Product Disclosure Statement are available on bnz.co.nz.

Investments in the BNZ KiwiSaver Scheme and YouWealth are not bank deposits or other liabilities of BNZ or any other member of the National Australia Bank Limited group. They are subject to investment risk, possible delays in repayment, possible loss of income and possible loss of principal invested. No person (including the New Zealand Government) guarantees (either fully or in part) the performance or returns of the BNZ KiwiSaver Scheme or YouWealth or the repayment of capital.

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