Smartshares Part 3

Smartshares Part 3

It is time for another quick look at Smartshares because a subscriber called VIC has asked for a follow up. Like a good movie my previous two blogs (Mr Happy Savers Index Fund Update and Buying shares in 27 minutes...) appear to have set up an ending full of suspense! What happens next? YES index funds ARE that interesting! So here is the next instalment...

I’m pleased that Vic let me know more information was needed to clarify things because it can feel slightly alarming signing up to something and sending your money off into the ether and then not knowing where it went. Makes me remember my $20 automatic payment that left my account and returned a week later FOR THREE YEARS that I did not notice. Not ideal!

Question 1 from Vic: I want to start investing in Smartshares and noticed it is so easy to set up an account using your steps but I feel like I was left hanging on the air after reading it. I have really no idea on what to do after opening an account.

Fear not! Once you have signed up via Smartshares they then guide you through the process of logging into your online account. You will end up on the website of a company called Link Market Services as they handle all your Smartshares once you purchase them. This is where you will be able to view all of the units you hold, your transactions and things specific to your portfolio, much like you would a bank account.

The  Log In page looks like this.

The Log In page looks like this.

“Issuer Name” is the fund you bought into. In my case its ticker code is FNZ which is the NZ Top 50.

“CSN/HRN” is your six digit common shareholder number you were issued.

“FIN” is your four digit identification number that you were issued.

“Security code is just checking you are not a robot.

Once logged in you can take a look at Holding Details. You will see this get updated throughout the month when anything happens which has an impact on your units that you have purchased:

FNZ Holding Details page.

FNZ Holding Details page.

Question 2 from Vic: I'll start by investing $500 with $50 monthly ongoing investment. So does it mean that Smartshares will get $50 from me and add it to my selected etf?

Yes. After you have set up with your initial $500 lump sum to get you started YES they will then begin to withdraw $50 per month as an automatic payment from your bank account from then on until you tell them to stop (or the funds are not available in your bank). They will take this money from your account on or around the 20th of each month. You don’t get to choose the date. Using that money your units are purchased on the last business day of the month for the “end of month price” and are issued to you sometime between the 3rd and 6th of the following month.

Any time after this date you can log in to Link Market Services and look at your Holding Details to see how many units were issued and the current value of them.

They have a cut off of the 20th of the month to receive your ‘order'. Keep in mind days of the week folks - if the 20th falls on a Saturday, get purchasing the day before! If you buy AFTER that date your units will NOT be issued in the next month.

For example:

If you buy $50 worth on the 17th Jan, your units will be issued on or around the 4th of Feb

If you buy $50 worth on the 21st Jan, your units will be issued on or around the 4th of Mar

It took me a little while to work out this annoying lag period but if I purchase before the 20th I’m fine!

Question 3 from Vic: What if I would like to buy more shares because the buying price is low, so how would I buy more shares other than my $50 a month.

When you want to buy additional Smartshare units (shares) you can make a lump sum contribution. You just return to the Smartshares website again and click the “Invest Now” tab. Because you are now an investor you have the CSN (common shareholder number) that they ask for and the process is pretty quick. Enter your CSN, enter your lump sum amount (for example $500), driver licence details etc and continue the process. Now because of this lag period that I mentioned above it makes it difficult to buy via Smartshares when the price is where you want it Vic. I was caught out the very first time because I, like you, was waiting to pounce. Turns out it does not work that way. And it also turns out that I, like the majority of people, cannot predict the future and know when the right time actually is. If you think you know, do share.

I rang Smartshares about this lag period which is stopping Vic buying when he feels the price is right. They pointed out if you want to take advantage of a good buying period you can do this through a share broker and it is more instant. That does not appeal to me, the point of Index Funds is the hands off approach. It is a sunny day out, I would rather go out for a run than sit and watch the markets.

Investing for me is putting away a set amount each month, doing this over a long period of time and getting a dividend payout for my efforts.

Therefore my philosophy with Smartshares is to buy them monthly and just accept that the price may be higher or lower. I am buying for the long term (ten years plus), will not be taking any money out and it will all average out in the end. If you look at my transaction history below my money buys me differing amounts each month and that is just how the cookie crumbles.

This is what I see when I log into my account and look at my transaction history.

This is what I see when I log into my account and look at my transaction history.

Regular Savings Plan shows how many units I am buying each month for my $101 automatic payment. It varies each month as the unit prices change. Some months it buys more and others less. So far it has swung between 44 and 50 units.

Investor Application is when I buy a lump sum which I am doing at the moment. I’m buying an additional $1000 each month as I steadily invest the money from my term deposit that matured a few months back.

Dividend Plan Allotment is the units I receive when the fund I am in pays out a dividend in June and December. Yippee!

My Running Balance is the units I hold, NOT the dollar value.

And although he did not ask it, Vic was probably wondering what happens next?

Once it is all up and running, you just continue to make your monthly payments (and lump sum investments if you want to). Smartshares will then keep in touch with you by letters/email about any dividends being paid out. I have chosen to have mine reinvested straight into my fund but you could choose to have them paid out to your bank account instead (just remember you are meant to be saving not spending…) I was unsure when they paid dividends but it is easy to find out. Just look at the Fund Details of the fund you go with and it has it written there clearly. For the NZ Top 50 they pay dividends June and December.

And that is it really. The more I learn about Index Funds the more confident I am with my decision to invest in them and once they are up and running it is smooth sailing. It is just a set and forget for me now. At the end of each month I take a look at the value of my investment so I can update my networth spreadsheet (such fun!) and I can’t see me slowing up on pushing money into them anytime soon.

I would really be interested in your experiences with Smartshares. When I phoned them this week with a question they mentioned that they are getting a large percentage of brand new investors (that’s YOU Vic) so no question is a silly question. Whether you have just joined them recently like Vic or have been investing for a while longer let me know how you are getting on.

Happy Saving!


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