How is my NZ Top 50 Index Fund going?

How is my NZ Top 50 Index Fund going?

Since January 2016 I’ve been drip feeding money into the SmartShares NZ Top 50 Index Fund (FNZ) on a monthly basis. I thought it might be interesting for you to actually see what someone else’s ACTUAL investment looks like because chances are that no one else is going to show you their account balance ;-)

I chose to invest directly with SmartShares (and blogged about it at the time: Buying shares in 27 minutes…) but you may be buying the same fund via a different provider such as Sharesies, Investnow, SuperLife etc. As always, I want you to learn something when you read my blog so in this post, I’m providing you lots of links to various sites so you can go and find out information about your own fund, whatever it might be.

I started investing in the NZ Top 50 Index Fund (ETF) because I have zero interest in buying rental housing and taking on debt and I wanted to invest instead in companies that are actually trying to grow the economy by providing jobs and creating goods and services that we need as a country. I had read the likes of JL Collins The Simple Path to Wealth and I felt comfortable with index funds instead of buying individual company shares.

How much did I start to invest with?

My very first purchase of this particular index fund was $2,000 and then I began monthly automatic investments of $50. When I felt comfortable that I understood the process I increased this to $100, then to $150. Now I invest $150 a month and I do a “lump sum contribution” when I build up enough spare cash; this amount ranges from $500 (which is the minimum lump sum investment I can do with SmartShares) to about $2,000. I set it up this way because both Jonny and I have variable incomes and I don’t want to set the bar so high with a regular savings amount that I can’t keep up. Plus I know that I have the self control to divert this ‘extra’ money to these funds when it becomes available.

When I send this money off to this investment I know that I won’t be accessing it again for at least another ten years. Although I could cash it out tomorrow if I wanted to, I’ve never been tempted to sell a single share because sending money there is a FINAL decision for me and it is now out of our bank account and working for us elsewhere. Being a share investor is a long term financial commitment and everything I have learned from speaking to people, listening to podcasts and reading has told me that I am definitely looking ten years into the future for this fund.

What the SmartShares website tells me.

From the Fund Investor Report you can find the following information about the historical performance of this fund:

SmartShares NZ Top 50 Summary

One of the important things to note is that these returns are after tax of 28% and after fund charges. It’s worth following the link to check out all of the other funds and their performance, because to me at least, it makes interesting reading!

What the NZX website tells me.

Another excellent resource is www.nzx.com/instruments/FNZ which keeps an up to the minute record of what’s going on:

NZX NZ Top 50 Fund Overview

Also, from the NZX I can see the dividends that have been paid and are about to be paid: www.nzx.com/instruments/FNZ/dividends

From the NZX - FNZ Dividends - Upcoming dividends and Historical dividends

What my own numbers tell me.

I track my very OWN fund performance and my own actual investment using the free tools on www.sharesight.com (a fantastic NZ company). I am not an expert at using this tool, but I know enough to get by and manually input my once a month purchase and this is how things are looking for me since I first began buying:

Sharesight showing my own NZ Top 50 Fund performance.

My first trade was in January 2016 and the share price was $2.070.

My most recent trade was May 2019 and the share price was $2.830.

That is a rise in the price of .76 cents per share or 27% over a three and a half year period.

Note the capital gain of 12.68%. My dividends are automatically reinvested and have been 4.44% per annum (the green dollar signs you see on the graph are the dividend payouts).

I have invested about $23,500 the remainder that makes up my current value of $32,351 therefore comes from dividends and the rise in share price (capital gains). That’s how it works folks!

A couple of things stand out to me:

  1. I am PRETTY HAPPY with the progress I’m making with this fund.

  2. The reason I like an index fund instead of property as an investment is that I own these funds outright with no lending and I too have received capital gains. The difference is that I could sell this afternoon and receive those gains immediately.

Why does everyone focus on the crash and not the rise?

Do you remember the alarmist headlines in the news just prior to Christmas 2018? There was hype over whether the dropping market was yet another sign of an impending sharemarket crash. Well, look at my graph above, it continues upwards. No crash.

In fact, since the financial crisis of 2008, this is how things have panned out:

The lesson? Don’t look to the headlines for your stock market analysis. They have NO IDEA what is coming. And nor do I. We have had major share market crashes before, so it seems obvious to me that it will unfortunately happen again, but then in the course of the share market this is always followed by a recovery and a rise. I don’t let a headline (nor my friends) scare me.

Nor do I worry myself with the weekly political and business happenings that have an impact on the ebb and flow of the market because if I did I would NEVER invest.

Save the cents and the dollars will save themselves.

It is remarkable to me that a monthly investment over 42 months has grown to $32,351 in this investment.

Do I “miss” that $150 taken from my account each month? No.

Can I recall how many and what the lump sum contributions were? No.

Do I recall what the share price was when I invested, whether it was up or down? No.

Investing in this fund has become a habit and clearly shows me what slow, steady, calm, not timing the market investing looks like.

I’ve got other Index Funds too:

This is one of three Index Funds I own. I also have US500 (USF) and NZ Property Fund (NPF), plus of course Jonny and I each have our KiwiSaver funds and I track all of these in Sharesight, updating them at the end of each month. I use the same strategy (but with different monthly dollar amounts) to invest into the rest of these funds and I have to be completely honest, apart from tracking the balance on a monthly basis I don’t pay too much attention, which is the way I think it should be.

I’m not afraid to be an investor in the share market.

When I tell people I invest in the stock market their first reaction is alarm, an emotion which I’ve come to expect and understand from others, because they clearly hear the news headlines more than I do. But my whole experience has been a positive one and the monthly ebb and flow of the market has just become part of life really. People want to know how I will react when the market dives one day, they want to see me panic and sell so they can say “told you so”, but instead I just think about how far we have come, where we are going with this in the long term and think “I’ll just grit my teeth and roll with it”. You only lose if you sell after all. And I ain’t selling. I reflect on IF I had listened to all of the naysayers when KiwiSaver started up and had NEVER signed up and those who say “you only invest what you can afford to lose” - and I am so thankful I never took their ill informed advice.

Who knows what the next one to ten years will bring and how much the markets will rise or fall. I just know that whatever they do, as long as I have income coming in I’ll just keep quietly pushing money into each investment in good times and bad.

Your own numbers will be different to mine, they may be a lot more, they may be a lot less. My actual dollar amount really only has relevance to me and my own goals, but I really do hope that sharing this has been useful to you in your own investing journey.

Happy Saving!

Ruth

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