I have stopped buying the US 500. Well, sort of.
11 May, 2025
In late 2024, I moved my KiwiSaver to a new provider and into a new fund. I moved from a KiwiSaver fund that had become more actively invested, choosing instead a massively diverse, large, and passively managed Total World KiwiSaver Fund. In the blog post Why I Changed KiwiSaver Providers, I wrote about my reasoning.
Once the changeover was complete, Jonny and I had just two investments:
KiwiSaver Total World Fund
US 500 Exchange Traded Fund (ETF)
In addition to these two investments, we have established a solid financial foundation, with cash in the bank to meet short-term to medium-term financial goals, plus an emergency fund. Our finances have a balance and structure that makes me feel organised and prepared for the future.
Managing our money is never ‘done’.
I am constantly tweaking and adjusting. Whether for the little things like an increase in our weekly rates bill, or preparing for a bigger expense, such as our recent car and hot water system repairs. Our income and costs are constantly in flux, and we need to keep monitoring and evolving with those changes. The time has come to tweak our investments.
Which is why, once I was up and running with our new KiwiSaver provider, I turned my attention to our US 500 ETF and began researching whether we should also slightly adjust our direction with this investment.
I followed the advice of JL Collins.
Sometime in 2016/2017, I read The Simple Path to Wealth by JL Collins, where he suggested that buying a US 500 Index Fund or ETF (same, but slightly different) was as diversified as most investors needed to be; that is the path we have taken. It didn’t stop me from dabbling in other things, but for those who have followed The Happy Saver for the last nine years, you’ve watched me refine our investments to our two current ones: KiwiSaver and one ETF, the US 500.
Our goal has been to grow each investment by adding the minimum to our KiwiSaver to get employer contributions, plus the meagre annual government contribution, and the maximum to our ETF. I chose to do this because we want to give up all paid work in our 50s, and we will need to draw an income from our ETF investment to enable us to live. Once we turn 65, we can begin using our KiwiSaver too. My recent blog post How much money do I need to have invested at 65 talks about how this will play out for us.
We are aiming to invest $1,000,0000, and then we will reassess.
Every $100,000 we invest in our KiwiSaver and ETF has the potential to provide us with $4,000 - $5,000 of passive, tax-free* annual income, loosely in line with the 4% Rule. Therefore, one million dollars invested could provide a yearly income of $40,000 - $50,000.
* When you invest your after-tax income in an ETF, you pay taxes on the distributions (income) it pays out during the year. These funds pay very small distributions. For example, in 2024, our roughly $350,000 ETF investment paid out $1,600 in distributions. We pay tax on the $1,600 income, not the $350,000. We do not pay capital gains tax on the increase in value of our investment. We do not invest for distributions (dividend income) but for capital gains. If I decide to sell off 4%-5% of our ETF once per year, there is no additional tax to pay.
I no longer feel nervous about investing in the share market. This is a bold statement given that the Trump presidency is currently sinking the share market like a rock. While Trump is making a hash of things now, global economies have survived worse. And no doubt, sadly, we will have to endure worse again sometime in the future. As every company we own in our ETF and KiwiSaver struggles to navigate, survive and thrive in the current economic climate, I keep in mind that share markets bounce back over time.
Sharesight Share Checker showing the performance of $10,000 invested for ten years. I stay focused on the long term.
I don’t always sleep well at night.
I feel more nervous about having a mortgage-free house worth ~$950,000 than share investments worth ~$600,000.
Our house is: ONE dwelling, On ONE street, In ONE town
Given that it is also an insurance build because we lost our previous house in the Canterbury Earthquakes, the term “as safe as houses” does not hold the same meaning for Jonny and I as it might for you.
While all my housing eggs are in one house, my KiwiSaver and Exchange Traded Fund are invested in ~8,000 of the world's biggest companies. Knowing this helps me sleep better at night.
If my house falls down again, I’ll be back at square one as I go through the lengthy insurance and rebuild process, ploughing money back into a single property. But when companies in our investments go bust, others quickly take their place in my ETF. Over time, each company I own is innovating and growing in value, which pulls the share markets up. Our US 500 ETF investments represent the average of those companies within it.
At the end of the day, our investments can pay us an income each year, while our house does not.
We aim to have a small home and a huge investment.
Jonny and I are on an ongoing mission to have our investments worth much more than our house. It is slow going because we chose to be semi-retired, which reduces our incomes, but by steadily investing each month, we are slowly getting there. Currently, almost 40% of our net worth is invested in assets that can provide us with income. We are steadily working towards increasing this percentage.
As we move closer to our early retirement goal, I review the investment vehicle that will take us there.
With our KiwiSavers now in a Total World Fund, I knew it was time to look at our US 500 ETF. We went with the US 500 because everything I read, watched and listened to, plus the people I spoke with, said it's a valid investment to grow wealth over time.
It’s true, we have.
Over the last couple of years, the conversation has shifted slightly to say that while a US 500 fund, due to being so massive, is still a valid investment option, investing in a Total World Fund ETF (~65% of which is the US 500) is also a valid option. Investing only in the United States of America could mean that we miss out on other massive companies in different countries. Plus, if the U.S. goes into decline, other countries might pick up that slack. That all sounded like an interesting theory until the current president entered the White House.
I have no regrets about investing in the US 500.
When I look at the Smart ETF performance information, the US 500 (USF) has been slightly cheaper to use, and it has outperformed the Total World Fund (TWF) by 2.4% over the last five years:
USF - SMART US 500 ETF
5 Years p.a. - 14.13%
Fund Charges - .34%
TWF - SMART TOTAL WORLD ETF
5 Years p.a. - 11.71%
Fund Charges - .40%
* Smart fund performance figures are current as of 8.5.2025. Figures above are after fund charges and tax of 28% and include reinvestment of distributions (a type of dividend).
The US 500 ETF has served us well. However, the investment that got us to this point might not be the investment that takes us to the next level. This is why, having changed our KiwiSaver to a Total World Fund, we have also begun investing in a Total World Fund ETF outside of KiwiSaver.
Research. Decide. Act.
I’m long on research and short on decision-making. So, after much research, the decision was pretty simple.
Tip: When I have to make a financial decision, I either pick a date to have it made by or choose a dollar amount. I had decided that when our total investments reached $600,000, I would reassess whether we continued with the US 500 or changed to a Total World Fund.
In early 2025, we stopped making new monthly contributions into our US 500 ETF and started contributing to a Total World Fund ETF instead.
Because the USA is globally dominant, ~65% of the TWF comprises the US 500. So, I’m still buying the US 500, but I’ve got the bonus of adding more massive companies to it that are based in other countries throughout the world.
Katie Donegan created this graphic to show the composition of the FTSE Global All Cap Fund, a total world fund. Each colour shows a different country. The biggest colour block is America, the second is Japan, and so on. Please follow the link and read the whole blog post about diversification.
There is no need to sell our US 500 ETF.
I have not sold our US 500 ETF and have no immediate plans to, especially given that share markets are currently down. I don’t need the money, we don’t need to sell and ‘lock in our losses’. Give it time, it will come back up again.
We are still in the black because we have invested monthly for so long. According to Sharesight, our total return is currently 10.50%. Therefore, no need or reason to sell. Those units can just sit there and will continue to receive distributions in June and December.
Instead of reinvesting these distributions in the same fund, however, I will have them paid out to my bank account, and then I’ll reinvest them into our Total World Fund ETF.
When the share markets bounce back over time, I’ll consider rebalancing our investments by selling the entire US 500 investment and moving that money into our new Total World Fund ETF, but not now. There is no harm in them just staying invested in this way.
So, that's it really. Going forward, we have three investments:
KiwiSaver Total World Fund
Total World Fund ETF
US 500 ETF
Priority #1: Invest!
If and when I rebalance, I’ll let you know. But for now, I just wanted to share that while we have altered our course slightly, it is still business as usual, investing as much as we can, every month, without fail. Currently, in 2025, we are managing to invest about 25% of our take-home pay, a percentage that I am trying to increase. I aim to invest 35% of our take-home pay.
Each time we buy, the price we pay is different, and currently, the units are being discounted due to a single twitchy American messing around in global politics.
The share market won’t always be on sale, but currently it is, and to the best of our ability, we will be taking advantage of it. On March 5th, we paid $4.13 per share/unit. On April 3rd, we paid $3.96. We got the same unit .17c, or 4% cheaper. Do I like seeing our hard-earned after-tax income invested, and then go down in value? No, not really, but it’s not the monthly fluctuations that I focus on; it's the annual and decade-long increase in value that interests me.
For now, I just buy and only check our investments on the 1st of every new month when I update our net worth spreadsheet. Over time, our net worth is growing.
The purpose of sharing what we are doing is not so you emulate me - remember that I have no financial qualifications and this is not financial advice - but simply so that you can see under the hood of how this whānau of three is managing their money and how we are progressing over time. I know my audience is curious about how I manage our pūtea, not so you can judge, but so you can use what I’ve shared to add to your research. I hope I have helped you today 😊
