The hardest decision about growing your wealth is knowing when to start that first investment. This how to invest guide will walk you through the process step-by-step. Helping you to build the confidence to create a plan, save more each month, and invest for long-term growth.
Learn how to invest in company stocks, including how to choose a brokerage account and research global companies you want to invest in. When you invest in a company’s stock, you believe the company will grow and perform well over time. This growth is what will lead to a good return on your investment. The good news is that you don’t need a lot of money to start investing in stocks.
A. "I have read about choosing funds such as ETFs and will invest by myself."
You can learn how to choose a managed fund, such as an Exchange-Traded Fund (ETF).
B. "I will take a DIY approach and pick individual company stocks myself."
This article and website is dedicated for investors who want to learn as much as possible about investing. You will learn how to choose the investment brokerage account for your needs, explore ETFs to buy, how to stock pick or choose both option A & B and manage your own investments. You can certainly combine both options A & C, which many investors do. The difference lies in how involved you want to be and how much you want to learn about investing in company stocks.
C. "I want to invest in the stock market, but I don't want to learn how to buy and sell."
A broker such as Milford Asset Management might be better suited for you.
Ask yourself: Do you want someone else to invest on your behalf and manage your portfolio - this is the hands off option. Or do you want to select specific ETFs or companies to invest in, monitoring their financial results and share price movements yourself - this is the DIY option.
Making your first investment often sparks curiosity about how the share market works. So with a few months of regular saving and investing, it’s normal for your knowledge to grow considerably and fast.
ETFs and dollar cost average for the long term, which is still a hands off style but you continue learning a lot.
Or DIY investing in the biggest companies, to dollar cost average, taking small profits at all time highs and buying the dips.
To make your first investment, you’ll need to create an account with an investment app platform that offers the shares, ETFs, and funds you want. Here are investing apps and platforms we recommend:
Tiger Brokers for NZ beginner investors: ETFs and Stocks.
Hatch for NZ beginner investors: ETFs and Stocks.
eToro for beginners and intermediate investors: Foreign ETFs and Stocks.
Trading 212 for advanced investors: Foreign Stocks, ETFs, CFDs, and forex.
IBKR for advanced investors: NZ & Foreign Stocks, ETFs, CFDs, and forex.
You should evaluate investment app platforms based on factors such as costs, investment selection, investor research, analysis tools and 24/7 customer service access. All investment apps will require a proof of your identity, proof of address and complete a short questionnaire.
Most people choose between two main ways to invest in stocks:
1. ETFs or Stock Mutual Funds
ETFs are special types of mutual funds that follow a group of companies, like the S&P 500. When you buy these funds, you own a little bit of all those companies. Mutual funds let you buy small parts of many different companies all at once. You can mix different funds to spread out your risk. Sometimes, people call stock mutual funds “equity mutual funds.”
2. Individual Stocks
If you understand relatively well a particular company, you can buy a share or two to start with. You can try to build your own collection of stocks, but that takes time and research. Individual stocks can go up and down a lot. If you believe in the company for the long term, don’t worry if the price drops sometimes. Remember why you picked it.
If you invest in one ETF, that $1,000 is spread across for example, 50 or 100 companies at once. So if one company does poorly, you still have many others doing well. If you buy one company’s stock with $1,000, your money depends on how that one company performs. If it does well, you could make more money. But if it does badly, you could lose a lot.
Mutual funds are safer because they include many companies, which lowers your risk. For most people, especially those saving for retirement, investing mostly in mutual funds is a smart choice.
Most mutual funds usually don’t grow as fast as some individual stocks might. Picking the right individual stock can pay off big, but it’s less common to get rich from just one stock. If you decide to stock pick, make sure you have 10 or more stocks (assets) for example and diversify as much as possible.
Picking individual companies requires a lot research, assessing profitability, growth potential, and price trends. ETFs can provide a simpler, diversified alternative.
Most shares on the New Zealand share market cost less than $100, and platforms like Hatch allow you to buy fractional shares. How much you invest depends on what you can comfortably afford. Regularly saving a set amount from your income to invest is a smart strategy.
If you choose to buy individual shares, limit your exposure, as this is riskier. Experts typically advise keeping no more than 10% of your portfolio in individual stocks.
The amount depends on the share price. Shares can cost anywhere from a few dollars to over a thousand dollars each. Some brokerages allow you to buy fractional shares, so you can invest any dollar amount, even if it’s less than the price of a whole share, owning a portion of that stock.
If you want to invest in funds and have a small budget, exchange-traded funds (ETFs) might be the best option. Mutual funds often require minimum investments of $1,000 or more, while ETFs trade like stocks and can sometimes be purchased for less than $100 per share.
If you invest mainly through managed funds like ETFs (which most financial advisors recommend), you can allocate a large portion of your portfolio to them, especially if you have a long-term investment plan.
For example, a 30-year-old investing for retirement might allocate:
80% of their portfolio to ETFs
15% to individual stocks (to add some targeted risk and potential growth)
5% to higher-risk investments like cryptocurrency (optional and only if comfortable with the risk)
Sample Budget Plan - Let’s say you have $10,000 to invest:
$8,000 (80%) in ETFs - this spreads your money across many companies and lowers risk
$1,500 (15%) in individual stocks - for companies you believe in but want to keep small to limit risk
$500 (5%) in Cryptocurrency (Optional) - a high risk; only invest what you can afford to lose
ETFs: Put most of your money here for steady growth and diversification.
Individual Stocks: Invest a smaller amount to try for higher returns by picking companies you like.
Cryptocurrency: Optional and very risky. Only invest a small portion if you’re comfortable with the ups and downs.
If you don’t have $10,000 yet, start with smaller amounts and keep saving regularly. Even $50 or $100 invested over time can grow!
On average, the stock market returns about 10% per year over several decades. However, this is just an average across the entire market—some years will see gains, others losses, and individual stocks will perform differently.
For long-term investors, the stock market is a good investment regardless of daily or yearly ups and downs. It’s the long-term average growth that matters most.
One of the hardest but best things you can do after you start investing in stocks or mutual funds is not to watch them too closely. Unless you’re skilled at day trading (which most people are not), avoid checking your investments multiple times a day. Constantly watching can lead to unnecessary stress and poor decisions.
Warren Buffett, a famous investor, says most people should put their money in a low-cost S&P 500 index fund. He only buys individual stocks when he really believes the company will do well for a long time.
Investing shouldn’t be a gamble. A good plan is to choose low-cost funds that spread your money across many companies in New Zealand and around the world.
If you want to buy shares in certain companies, make sure to learn about them first. Many companies have failed over time.
Index funds are safer because they invest in lots of proven companies at once. That helps lower your risk.
Example of an Index Fund
An S&P 500 index fund is a popular choice. It owns shares in 500 of the biggest companies in the U.S., like Apple, Microsoft, and Amazon. By investing in this fund, you own a small part of all these companies.
Index Funds to Consider (avoid fund overlap if you invest in more than one)
(VOO) Vanguard Broad S&P 500 ETF - S&P 500 index fund
(VOOG) Vanguard Growth S&P 500 ETF - S&P 500 index fund
(SPY) SPDR S&P 500 ETF - S&P 500 index fund
(IVV) iShares Core S&P 500 ETF - S&P 500 index fund
(QQQ) Invesco QQQ Trust ETF - Nasdaq index fund
(VTI) Vanguard Total Stock Market ETF - CRSP US Total Market Index.
(VEA) Vanguard FTSE Developed ETF - Japan, UK, Canada, France, Germany.
(VGK) Vanguard FTSE Europe ETF - UK, France, Germany, Switzerland, Netherlands.
(VT or VT.US) Vanguard Total World ETF - Invests in both foreign and U.S. stocks.
(SCHD) Schwab U.S. Dividend Equity ETF - Tracks Dow Jones U.S. Dividend 100™ Index
You can compare Vanguard funds here
https://investor.vanguard.com/tools-calculators/
Other funds use this well known website
https://www.etfrc.com/funds/overlap.php
Discover ETFs and analyse class, returns, TER, Holdings, AUM, Dividend Yield.
https://www.etoro.com/discover/markets/etf
Please act as a financial analyst and analyse the key statistics for these ETF symbols I provide, then construct a detailed report in an easy-to-understand table format. Explain each metric, how the ETF is performing, and provide a 1 to 4 line deep-dive assessment.
The top 6 metrics to include are: Expense Ratio, Assets Under Management (AUM), Dividend Yield, Fund Overlap, Fund Age, and 12, 24, 36 month and all time performance.
Also, include any other metrics you consider important for a valuable, wealth-building ETF. Rate their performance on each metric from A+ to F- using Emoji letters for easy understanding, and also provide an overall performance rating. The information is for educational purposes only and should not be considered as financial advice.
The ETFs for analysis are:
While there’s a lot to learn, staying informed can be made easier by regularly reading articles and watching your preferred YouTube channels.
While worrying about daily market ups and downs won’t help your portfolio, or your peace of mind, there will be times when you need to review your investments.
If you’ve followed the earlier steps to buy mutual funds and individual stocks over time, it’s important to regularly check your portfolio to ensure it still matches your investment goals.
If you’re nearing retirement, you may want to shift some of your stock investments into more conservative fixed-income options like bonds.
If your portfolio is heavily weighted in one sector or industry, consider buying stocks or funds from other sectors to increase diversification.
Also, pay attention to geographic diversification. Vanguard recommends that up to 40% of the stocks in your portfolio be international. To achieve this, you can research and invest in international ETFs.
Most experts suggest reviewing your portfolio at least once or twice per quarter. This helps you stay on track with your goals without reacting to short-term market changes. Refer to upcoming earnings reports scheduled to be released by publicly-traded companies. You can view many company report release dates here https://www.etoro.com/investing/earnings-reports/
Over time, some investments may grow faster than others, changing your original allocation. Rebalancing means adjusting your holdings to get back to your target mix — for example, selling some investments that grew too large and buying more of others that are underrepresented.
Rebalancing helps maintain your desired level of risk and keeps your investment plan on track.
To invest in a specific company, decide how much you want to invest, say $250 or $500, and buy shares at the current market price.
Expanding your portfolio means repeating this process with different companies. Remember, every buy or sell transaction usually incurs a brokerage fee, typically a percentage of the order value. For example, at 1% brokerage, buying $2,000 worth of shares costs $20.
ETFs and index funds offer diversification, which lowers risk but generally don’t experience the rapid price spikes that some individual shares might.
That said, the chances of picking a single share that will make you wealthy are low. This is why professional fund managers diversify investments across countries, sectors, and industries, to aim for consistent returns while minimizing risk.
ETFs generally have some of the lowest expense ratios compared to other investment funds. The exact expense ratio can vary depending on whether the fund invests in stocks or bonds. On average, stock index ETFs charge about 0.15% per year. That means you would pay around $15 in fees for every $10,000 you have invested.
IMPORTANT INFORMATION
The information contained on this website is of a general nature and does not take into account your individual financial circumstances. It is provided for educational purposes only and does not constitute professional or personalised financial advice. You are strongly encouraged to seek independent financial advice tailored to your specific needs and situation. If you are experiencing financial hardship, you can contact the New Zealand National Debt Helpline on 1800 007 007.