Mr Happy Saver’s Index Fund (SmartShares) Update

Mr Happy Saver’s Index Fund (SmartShares) Update

If you would prefer to listen to me read this blog post, please click on the play button.

Back in July, you might recall my blog “How to buy shares in 27 minutes” that I wrote? I already had Index Funds so was a fully signed up investor but I wanted to complete the process from scratch, so that I could tell YOU all about it and show you how to get started.

If you have not read Part 1, go back and read it now… and then come back and join me as I am picking up where I left off:

Although Mr Happy Saver * completed the online application in July ( we still needed to wait a couple of weeks for him to be given a CSN (common shareholder number) and FIN (faster identification number/authorisation code), and of course to have his shares allocated to him. Until these steps were completed he would not be a shareholder.

He bought into a Smartshare Index Fund called NZ Mid Cap (or MDZ is its ticker code that you can use to look them up on the stock exchange). It is a fund (also referred to as an ETF or exchange traded fund) made up of medium sized companies that are listed on the NZX (New Zealand stock exchange). The fund began in 1997 and as you can tell by the name, its focus is in NZ. The price he paid per share when his application was actually processed in August was $4.19058.

The S&P/NZX Mid Cap Index is made up of financial products listed on the NZX Main Board and included in the S&P/NZX 50 Index, but excludes products included in the S&P/NZX 10 Index and products issued by non-New Zealand issuers. What? If you go on to the NZX website you will see a big list on the left hand side. Here you will find the NZX 50 and NZX 10 indexes. 

When he purchased $500 worth of the Smartshare MDZ Index Fund it was divided up so that he got a tiny piece of everything that makes up this fund, 112 shares in total:

Ticker : Company Name : What do they do? : What % did I get?

TME : Trade Me Group Ltd : Finance & Other Services : 6.47%        

MCY : Mercury NZ Limited : Energy Processing : 5.72%        

KPG : Kiwi Property Group Ltd : Property : 5.60%        

IFT : Infratil Ltd : Investment : 5.29%        

CNU : Chorus Ltd : Energy Processing : 4.55%

EBO : Ebos Group Ltd : Healthcare : 4.47%

MFT : Mainfreight Ltd : Freight : 4.36%

XRO : Xero Ltd : Financial : 4.32%

ATM : The A2 Milk Company Ltd : Consumer Staples : 3.84%

GMT : Goodman Property Trust : Property : 3.82%


When I say he got a tiny piece I meant it. The fund currently has a total fund value of $73,183,394!

Hang on a moment, just doing the math here: 112 shares x $4.19058 = $469.35.

Where did the other $30.65 of his $500 investment go?

I emailed them, so you don’t have to and this brings me rather neatly to the topic of FEES.

Everyone talks about fees in the realm of personal finance. All of us are trying to avoid them because we know they eat into our returns over a lifetime of investing. There is an initial application fee of $30 to get established in this fund for the first time. The remaining .65 cents is sitting in limbo as it could not purchase a full unit because each unit costs over $4.10. If and when he bought more shares he could use this residual amount but chances are there will always be a few cents or dollars left over and it will just remain there uselessly. The stated fees for this fund are .75% and these are accrued daily and charged monthly. These are made up of management fees and costs to run the fund and are a percentage per annum of your fund’s net asset value.

Personally I don’t mind paying fees - if they are reasonable. From what I have read, fees on NZ Index Funds (or seemingly any type of investment fund) are higher because the pool of money invested in an NZ fund is so small in comparison to say a fund from the USA. We have fewer people to spread the fees around so we tend to pay more. You will hear a lot of more savvy investors than moi complain bitterly about fees when they compare us with overseas and they plot, duck, dive, conive and twist themselves in knots to avoid these. Whatever, I’m happy to pay the fee, I’ve got better things to do. I’m off to walk my dog thanks.

Right, let us continue. Mr Happy Saver was emailed a letter by Link Market Services telling him that on the 5th of September he bought 112 shares in the FNZ Fund at the purchase price of $4.19058 per share. He was also issued his nine digit “CSN” or Common Shareholder number. At the same time he received a letter in the post giving him his four digit Authorisation or “FIN” code. Now that he has both a CSN and FIN he is good to go as an investor.

Using the information received from Link Market Services he then went onto their website, followed the instructions and completed the registration process. Why is it not Smartshares helping to complete the process? Well, they can’t. They need to appoint someone to do this on their behalf and have chosen Link Market Services to manage their securities registration process and provide ongoing support to you and I. Remember I said that I also have Meridian Shares, well they have chosen a different company to manage their securities registry and support their customers.

So now, whenever the mood takes him, he can hop onto his account and look at how many securities he has and what they are worth. The short answer currently is “not many” and “not much”. This is what he has today:


Last Close: NZD 4.01

Tradeable Balance: 112

Value: NZD 449.12

Non-Tradeable Balance: 0

Now that he is the real deal he could buy more shares to add to what he already has because he now has all the correct documentation to do it. He would just need to go back to the Smartshares website and follow the process again to buy more, using his CSN and FIN numbers. However, it is still not quite an instant “click and buy”. They process applications in the first couple of days of the new month, so if you think the price is right for you today and boom you want to buy, you are out of luck... The price is taken on the last day of the month before they are processed. Personally I buy a set amount every month anyway so sometimes I buy more units (because the price was low) and sometimes I buy less (because the price was high). It all averages out over time. Is this called dollar cost averaging? I think it might be.

The point of Mr Happy Saver buying these shares was so that I could detail the process and that is pretty much it folks! Now, you are one of the most clever readers I have met yet and will no doubt have noticed that he has managed to turn his $500 into $449.12? That initial establishment fee ($30) and a drop in the price of the shares ($20.23) is to blame but Mr Happy Saver is not stressed. Getting set up is just the beginning. What he should be doing now is starting regular monthly investments in the fund and sitting back and watching it grow. This is what I have been doing with my own fund and I’m now well ahead. I have set him up as a learning exercise and the learning will continue because what I want to do next is sell his shares. This is new to me, I’ve never sold any securities that I have purchased and I figure it would be kind of handy to know how it all works?

But before I do I’m going to let a little more time slide by so that he hangs around long enough to (hopefully) receive a dividend and an increase in the price of the shares. Dividend payment dates for Smartshares are June and December.

Smartshares provide information on the history of the fund and show you how much the fund has been returning over a period of time. Based on these historical returns I’m as confident as I can be that he will receive a little something.  Of course I'm planning long term so am mostly looking at year 5 below:

1 month : -.91%

3 month : 5.16%

1 year : 24.51% 

3 years annualised : 17.94%

5 years annualised : 18.66%

He had chosen to reinvest his dividend payouts (i.e. automatically buy more shares with them) and if the companies that make up his fund have been performing strongly then they are going to reward him for having faith in them and investing in their company. Without investors they could not do what they do, so they forward on some of their profits by way of dividends. Are you as EXCITED AS ME to see how that goes? If so, look me up in January for an update! Until then.

Happy Saving!



* Truth be told I’m using him (Mr Happy Saver) as a bit of a guinea pig, I do tell him what I’m signing him up for, and he is consenting, so it’s all good!

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